Builders are hammering away at more new houses than at any time since before last decade’s foreclosure crisis, and the construction boom is driving up lumber prices. Lumber prices have declined sharply from the record highs in early 2018 but have seen a bit of an increase lately. The graph below shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through January 24, 2020 (via NAHB), and 2) CME framing futures. Right now Random Lengths prices are up +14% from a year ago, and CME futures are up around +12% year-over-year. There is a seasonal pattern for lumber prices, and usually prices will increase in the Spring, and peak around May, and then bottom around October or November – although there is quite a bit of seasonal variability. The trade war was a factor in the sharp decline last year, with reports that lumber exports to China had declined by -40%. Now, with a pickup in housing, lumber prices are moving up again. Though relatively high, current prices are still well below a peak of $639 reached in May 2018. In December, U.S. housing starts surpassed a seasonally adjusted annual rate of 1.6 million. That is their highest level since December 2006, just months before the real-estate market unraveled. Residential building permits are being issued at the highest rate since 2007. Mild winter weather has extended the building season in much of the country. (Sources: Calculated Risk, Wall Street Journal)

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