Carpe Diem

Framing lumber prices hit an 8-year high last week as the US housing and construction sectors rebound

lumber A rebound in the US housing market, rising housing starts, and increased foreign demand brought framing lumber prices to an eight-year high last week of $423 per 1,000 board feet. That’s the highest price for the lumber used in the construction industry for framing new homes since the first week of March in 2005 (see blue line in chart). Framing lumber prices last week were 42.4% higher than a year ago, following year-over-year gains of more than 40% in each of the three previous weeks.

Prices for lumber futures contracts sold on the Chicago Mercantile Exchange (CME) rose by almost $5 per 1,000 board feet last week to $395, from $380.30 the previous week. Except for a slightly higher price of $390.50 in mid-February, lumber futures prices are at their highest level since the last week of March in 2005 (see red line in chart).

MP: The rebound in lumber prices last week to an eight-year high is more evidence that a robust recovery is underway in the US housing and construction markets.

10 thoughts on “Framing lumber prices hit an 8-year high last week as the US housing and construction sectors rebound

  1. i dont understand why a high price for framing lumber is something we should applaud while a high price for other commodities, for instance, oil or wheat, isnt..

    • Prices of agricultural crops like wheat are subject to forces of nature – namely, the weather. While simple demand can cause wheat prices to rise, the usual suspect is poor weather in some important wheat-growing region. Additionally, these are items we consume every day, so we should be more concerned if the price rises than many other goods.

      Oil/gasoline is, in a way, like wheat, in that we consume it every day, and we are naturally concerned if the price rises too high.

      Lumber, on the other hand, we typically consume only once in a long while if and when we buy a newly-built house (or do your own remodeling project). So, our daily budgets are less sensitive to it. Also, it is not nearly as affected by weather as wheat and other crops. So, we can watch its price rise in response to increased demand more dispassionately than we can wheat or oil.

  2. Adjusted for inflation, lumber prices are still 10% below 2005 levels, and in that sense a real bargain today. To the extent that lumber prices are a barometer of the strength of the housing market, rising framing lumber prices are a sign of a housing recovery, which will increase home prices, increase homeowners’ equity, increase construction jobs, etc.

  3. The issue isn’t that the price is high, it’s that the added 1400-2000 in lumber may keep a good portion of the basic homes from appraising out for financing and ever getting started. I think we all know that the bulk of the future market and any potential recovery is going to be in basic starter homes and if they don’t appraise out at the banking end in this market they don’t get built. We need a couple more OSB mills to open and log supply to increase to bring prices in line so everyone benefits, otherwise the brakes are going to squeal any pending rebound to a halt. That’s the bottom line.

  4. The issue isn’t that the price is high, it’s that the added 1400-2000 in lumber may keep a good portion of the basic homes from appraising out for financing and ever getting started.

    Maybe the builder can put on a cheaper roof to make up for it. :)

    It’s not clear why you think that relatively small amount will make much difference, and in the case of buyer financing, it’s been my experience that many developers will establish a relationship with a lender when they start building. Perhaps the same one that provides the construction financing.

  5. ONE ONLY NEED TO LOOK TO THE PROFITS OF THE georgia-PACIfic company to know that the rising prices are ALL about GREED.. PRICES ROSE 200 percent right after HURRICANE sandy on the east coast and haven’t dropped back down since.. PLyWOOD SHEETS 30- 50 per sheet at home depot which before SANDY WERE SELLING AT 12-14.
    OSB that was 6-7 a sheet IN 2012 now selling for 18 a sheet; this company owned by koch industries shows you how continued profits by private companies can raise the prices to any amount and put a strangle hold on
    development, new construction when building materials cost are way out of line..
    [NEW YORK — Georgia-Pacific, the U.S. paper giant that makes Dixie cups and Brawny paper towels, has agreed to be sold for $13.2 billion to Koch Industries, a family-controlled conglomerate that will become the largest privately held company in the United States.]

  6. Takeanotherlook, they are greedy ?

    Then what do you say about governmental units, which robs the producers of their labor and gives you nothing in return, not even a single piece of plywood…

    BTW, you can always replace plywood with plaster…

  7. I had planned on building a new home after a cheating spouse forced me to sell mine yet again…..I got sticker shock today for what I did on my material take off last year at 25 and some change for 3/4 T&G ply is now 39 and change at HD & Lowes. I literally cannot afford to build my sub 1100 square foot home at these prices. This I would think would hurt the industry by squeezing more profit from an already strained businessman or either over inflate the prices yet again and cause the same problem we had before with the bubble bursting and the true worth of homes being lowered below sale prices. I don’t know about you, but I refuse to pay this much for wood. I’m going to look for a flip house or something in another direction altogether. I be a party to greed and that is all it is, this cost no more and it’s speculation and price gouging at best driving up prices!

    • Good points, Mr Crabb.

      I recently purchase several wood chip bags at HDespot for $5.oo + tax…

      Three years ago, the same produce cost somewhere around $3.50 per bag!

      Wood produces have gone through the roof..

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