Booming buyer demand, withering U.S. lumber supplies and a tariff hike on Canadian softwood have pushed lumber prices to a pandemic high, with sales contracts closing at $950 Wednesday.
After reaching record highs in the first quarter of 2021, lumber prices leveled out during the summer with sales contracts for two-by-fours dipping as low as $454.20 per thousand board feet in August. However, robust buyer demand, unseasonably warm weather and rising tariffs are pushing prices near their pandemic high, with sales contracts closing on the Nasdaq at $949.30 on Wednesday.
“The factors that caused the rise in lumber prices earlier in the year are still at play today,” Mickey Director of Trading and Growth Commodities Chip Setzer told GlobeSt on Thursday. “Weather continues to be a driving factor for both supply and demand.”
“We’ve seen unseasonably warmer temperatures across the US which has allowed construction to continue well into the start of winter,” he added. “This has allowed the demand for building materials to remain strong.”
May was the peak of the lumber pricing frenzy, with sales contracts for two-by-fours reaching an all-time high of $1,500.50 per thousand board feet, according to a previous Inman article. However, prices began to cool in July and August, with two-by-four sales contracts dipping into mid-$400s before popping back up to the $600 to $700 range in October and skyrocketing past the $900-mark in late November.
Mickey Director of Finance Ross Price told GlobeSt. the Biden Administration’s November announcement they’d be increasing tariffs from 9 percent to 17.9 percent on Canadian softwood lumber is to blame for skyrocketing sales contracts, and prices “may continue to rise to above $1,000, which was last seen in Spring 2021.”
The National Association of Home Builders blasted the Biden Administration on Tuesday for raising tariffs, saying the decision flies in the face of Biden’s push to create more affordable housing and close the homeownership gap.
“With the nation in the midst of a housing affordability crisis, the Biden administration has moved to slap a huge, unwanted tax hike on American home buyers and renters,” NAHB Chairman Chuck Fowke said in a statement to NPR.
Although the Biden Administration told NPR the 8.9 percent increase is due to “antidumping and countervailing duties” rather than “crude protectionism,” Fowke said the decision will lead to an increase in home prices, similar to Q1 and Q2 when rising lumber costs tacked an extra $36k onto the price of an average new single-family home.
“This is the worst time to add needless housing costs onto the backs of hardworking American families,” Fowke added.
Realtor.com Senior Economist George Ratiu told Inman he expects lumber prices to keep rising into 2022, as unfavorable weather conditions impact the U.S. lumber supply and future tariff tikes are on the horizon.
“In addition to weather impacting harvesting and production in the Pacific Northwest, lumber prices are feeling the continued pressure of import duties,” he said. “The import duties on Canadian lumber enacted during the Trump administration remain on the books and are being compounded by the recent announcement from the Biden administration that the Commerce Department will double them in 2022. Futures markets are simply reacting to ongoing demand and supply dynamics.”
Ratiu couldn’t provide an exact dollar estimate of what rising lumber costs will do to home prices, but he said homebuyers need to brace themselves for higher housing costs in 2022.
“For buyers looking for a home, expect to continue seeing higher prices into 2022. With Realtor.com calculating that we’re over 5.2 million new homes short, housing is in dire need of a substantial number of new homes,” he explained. “With labor shortages continuing to impact the home building industry, the strong rise in lumber prices will add upward pressure on both costs and final consumer prices.”