Lumber Prices Crashed, For How Long?

  • 2 min read

The pain in the lumber market is not over. According to an article from Business Insider, commodities experts and analysts are saying that 2023, particularly the beginning of the year, is going to be even more difficult for lumber producers and mills than the previous year. They’re calling it ‘treacherous’.

According to the article, lumber prices are already off by 66%. And they consider that a crash from previous highs. The reasons are simple, riding mortgage rates kept people from buying houses, and the slowdown in home sales made builders not want to produce. The analyst in the article stated that the price of lumber is already down from $1,160 to $400 per thousand board feet. That’s a huge drop from the previous year.

So don’t expect lumber prices to go back up dramatically, but at the same time, you may find that once this balances out and the mill curtailment capacity is absorbed, it might spike back up again. The mills are now curtaining their output, they’re shutting down production because at $400 it’s not worth producing.

Some of these curtailments may become permanent because once mill equipment and employees become used to the fact that they’re not being used, the equipment will become outdated and may not be maintained. Employees will eventually take other jobs. Now, all of a sudden the demand level goes up in 2024-2025, and you’re going to have a capacity constraint that spikes the price back up because of construction. 

Now, the question is going to be whether or not people want to buy homes again in the next two or three years. But there’s still a demand because there are 5 million homes fewer than what’s currently needed for residential single-family homes. 

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