Lumber prices rallied this week to their highest levels in more than six years, with the price of framing lumber hitting $373 per 1,000 board feet (see blue line in chart) on Friday and the price of CME lumber futures reaching $356 (see red line), according to new data from the NAHB. Framing lumber prices have increased 38% since the beginning of the year, and are trading at their highest level since May 2006. CME lumber futures have rallied 43% in 2012 and are trading at their highest level since early February 2006, almost seven years ago. Compared to the cyclical lows in early 2009 when there was an oversupply of lumber because of the recession and a collapse in residential construction, framing prices have almost doubled and CME futures have more than doubled.
According to Bloomberg, lumber prices in 2012 have increased more than any of the 24 commodities tracked by the Standard & Poor’s GSCI Spot Index. Here’s more from Bloomberg:
Since 2009, lumber output has plunged in Russia while China boosted imports, limiting lumber supplies in North America just as demand rebounds, according to International Wood Markets Group.
Housing starts that in October reached an annual rate of 894,000, the highest since July 2008, may exceed 1 million a month by the end of 2013, Michelle Meyer, a New York-based senior economist at Bank of America, the second-biggest U.S. lender by assets, said earlier this month. U.S. building permits, a proxy for future construction, reached a four-year high in September, government data show.
“Housing inventories are coming down, and housing prices are coming up in major markets in the U.S.,” Hakan Ekstrom, the president at Wood Resource International LLC in Seattle, Washington, said in a telephone interview. “That’s an indication that demand is higher than supply and that’s likely to continue next year.”
MP: Rising lumber prices, reflecting increased construction activity in the U.S., is one more market indicator that a housing recovery is now underway. 2012 will be known as the year of the U.S. housing recovery, and all indicators point to an even better year in 2013 for home sales, home prices, and home building.