Lumber's Highs, Lows

February 11, 2019
Lumber prices posted a 25 percent increase in January 2019, but analysts warn that the market may be overbought, and conditions are similar to last year when prices hit an all-time high and then fell.
Photo: Unsplash/Sebastian Pociecha

Lumber prices posted a 25 percent increase in January 2019, but analysts warn that the market may be overbought, and conditions are similar to last year when prices hit an all-time high and then fell.

Last week, lumber futures reached $424.50 per 1,000 board feet, and trade nearly 28 percent higher year-over-year as of February 7, 2019. The SPDR S&P Home builders exchange-traded fund XHB has gained 14 percent annually thus far.  Greg Kuta, an analyst and president of trading strategies commodities firm Westline Capital Strategies, tells MarketWatch, “We can see continued price appreciation, but in order to be sustainable, it must have the underlying support of real demand in the form of housing starts.”

“The market has a seasonal tendency to bottom out into the middle of January as buyers begin to accumulate in anticipation of their upcoming spring needs,” says Kuta. Still, he adds, “I don’t think anyone…is willing to wager a guess on what business will look like behind the impending spring needs. This has a very similar, eerie feel to rebuilding last year’s house of cards with recent appreciation of lumber prices.”

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