As low mortgage interest rates have boosted an already high demand for housing, builders have even more incentive to keep rolling out new construction homes. Housing starts are up 30% year over year–a 14-year high. But the increase in demand isn’t the sole reason lumber prices have jumped. The supply of lumber is completely off.
Mill operators and lumber dealers didn’t anticipate 2020 to go like it did (let’s be honest, who did?). In 2019, there weren’t as many housing starts or remodels. To reflect that downward trend, less lumber was produced for 2020.
While most industries took a nosedive, the housing market has ended up being a shining star of the pandemic.
Lumber mills weren’t prepared for it. Social distancing requirements forced mills to limit the number of workers per shift, furthering production delays. Not to mention the wildfires that incinerated thousands of acres of timberland.
There have been more people remodeling their homes, rather than spending money on travel or going out. And because the market for existing homes is so insanely competitive (i.e. dozens of offers at thousands of dollars over asking price), more people are looking to new construction homes.
Because the lumber supply simply doesn’t exist to meet the demand for construction starts, remodels and DIYers, prices have gone up dramatically. According to Random Lengths, lumber prices for softwood have increased 112% compared to this time last year. And in just the past week they have risen 10% in price.