The talk of the town has been that the global supply chain is a mess. Good news! Hope arises from these historically long delays and backlogs—the sky may stop falling as lumber prices are dropping and hoarders are selling.
The business of lumber.
Over the course of the last year, the price of softwood lumber—the type most often used by homebuilders for framing—has been steadily rising, owing to a multitude of pandemic-era factors. The clearest culprit is the boom in home renovations and building, whether it’s an update to an existing accessory dwelling in the backyard or a full-blown new build. By early May, the price hit an all-time high of $1,711.20 per thousand board feet, the standard metric for lumber (compared with $412.53 on June 21 of last year, and $344.24 at the start of 2019). To put this in perspective: New homes cost an average of $34,000 more as a result of the lumber market, reports Forbes.
However, this week, the market opened at $897.90 per thousand board feet, down more than 45 percent from May’s peak. “The rapid decline suggests a bubble that has burst, and the question is how low lumber prices will fall,” writes commodities reporter Ryan Dezember for The Wall Street Journal. Although still a way to go before we return to normal, softwood prices are starting to break.
What happened during the pandemic.
Many in the lumber industry felt the fall was inevitable but examining the trend over the past year and a half, the price of lumber was an indicator of the market’s overall volatility. Like many other businesses, when the pandemic set in, mills shut down and dealers sold their inventories. It wasn’t long after lockdowns eased that the housing boom arrived—with nowhere to go, Americans collectively felt a vigorous interest in the comforts of home. Many channeling that interest into remodeling projects, with others taking advantage of low mortgage rates in suburbs, and yet others began building outdoor spaces.
In a flash, plywood and lumber were snatched up off the shelves, adding fuel to a frenzied fire of demand in the U.S. By the time sawmills resumed operations, however, demand was so great that the supply couldn’t keep up—and as a result, prices jumped. Now that prices are on the decline, what does that mean for designers?
Depends on the design project.
The two main categories of lumber are softwoods and hardwoods. As a rule of thumb, softwood tends to mean a new build, while hardwood typically is used in remodels. And though there is increasing optimism in the lumber market, it’s important to note that analysts are focused on softwood.
Although we are seeing a dip down in softwood prices, hardwood prices have not lowered. Typically speaking, where softwood goes, hardwood follows, so it does bode well for the future of hardwood.
The future of lumber.
Even though the market is breathing a sigh of relief, designers likely won’t feel an immediate change. The delays for new builds will get shorter and budgets will stretch a bit further leaving more dollars available for design; however, specification of custom hardwood furniture and flooring won’t see improvement in the short term.