Skyrocketing lumber prices have kept some builders away from purchasing in hopes costs would level out, but now lumber prices are expected to spike even higher. Spring and summer building and buying season is here and demand is even higher. Lumber prices reached $1,048 per thousand board feet last week, according to Random Lengths—a 193% increase from one year ago. But just this week, the May futures contract price per thousand board feet of two-by-fours went from $32 to $1,158, says Fortune. Wood production even hit a 13-year high in February, but it’s not enough for current demand.
“It’s clearly a short squeeze. In futures and spot markets. Lumberyards are overcommitted on their sales, and there isn’t enough wood to cover,” Dean told Fortune. This is a clear signal, he says, that prices will go up more in the short term.
From the onset, the pandemic was a perfect storm for surging lumber prices. At the same time that sawmills were limiting production during the early months of the crisis, the pandemic was spurring a do-it-yourself boom among Americans stuck at home. That supply and demand mismatch was made worse by record low interest rates and a historically tight existing housing inventory which caused buyers to rush to new construction. The backlog is so big that prices aren’t falling despite wood production hitting a 13-year high in February.