Currently Reading

Why Buyers Won’t Find Relief in Lower Lumber Prices

Advertisement
Building Materials

Why Buyers Won’t Find Relief in Lower Lumber Prices


July 20, 2021
framed home
Photo: 2tun | stock.adobe.com

Homebuyers will not see lower home prices due to dropping lumber prices because it’s just one factor among many others causing builders to raise prices. The cost for steel mill products and OSB remain elevated in addition to an ongoing shortage of skilled labor and buildable lots. On top of those factors, there remains a high demand for housing. CNBC says builders have no reason to lower prices at this time. Though lumber prices are down more than 50% in the course of a few months, prices remain 100% higher than spring 2020 and there are builders still working with lumber they purchased at those heightened prices.

“As the price declines began grabbing headlines, the price of lumber packages quoted to builders held at record highs,” wrote David Logan, senior economist at the National Association of Home Builders. “In economics jargon, prices paid by builders—or ‘street’ prices—were ‘sticky.’  This dynamic is primarily due to dealers’ inventory carrying costs and potentially large differences between the price at which inventory is bought and sold.”

The price of lumber packages quoted to homebuilders is still at a record high, according to Logan. Retailers of course want to buy their product low and sell high, so they’re still selling the inventory they have at higher prices, despite what the futures market says. Also, given soaring demand and supply chain issues, their inventory is low anyway, and there is still demand, so they have no reason to lower prices. But that will change in the coming months. 

“We are still in a price discovery mode,” said Michael Goodman, director of specialty products at Sherwood Lumber, a national wholesaler and distributor in Palmer, Massachusetts. Sherwood buys from mills in North American and Europe and ships directly to its customers.

Goodman said they are just now seeing a lot more product come to the market.

Read More
 

Related Stories

NAHB

Why Builders Wait to See Lower Lumber Prices

NAHB Policy Brief | Lumber prices have moderated, but lower costs haven't worked their way to home builders; new-home prices are too expensive for lower-income households

Building Materials

What Saw Mills Experienced During Lumber Price Spikes and Why

Remodeling, DIY, and home building demand pushed lumber prices to new heights this past year, and it might make sense to believe lumber mills…

New-Home Sales

Interest in New Homes Falls, High Prices Likely to Blame

Fewer prospective buyers are looking to purchase a newly constructed home, likely a result from ongoing price increases, says the National…

Advertisement
Advertisement

More in Category




Advertisement
Advertisement

Create an account

By creating an account, you agree to Pro Builder's terms of service and privacy policy.


Daily Feed Newsletter

Get Pro Builder in your inbox

Each day, Pro Builder's editors assemble the latest breaking industry news, hottest trends, and most relevant research, delivered to your inbox.

Save the stories you care about

Lorem ipsum dolor sit amet lorem ipsum dolor sit amet lorem ipsum dolor sit amet.

The bookmark icon allows you to save any story to your account to read it later
Tap it once to save, and tap it again to unsave

It looks like you’re using an ad-blocker!

Pro Builder is an advertisting supported site and we noticed you have ad-blocking enabled in your browser. There are two ways you can keep reading:

Disable your ad-blocker
Disable now
Subscribe to Pro Builder
Subscribe
Already a member? Sign in
Become a Member

Subscribe to Pro Builder for unlimited access

Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.