High lumber prices are returning, and home buyers should brace themselves for impact. The prices can have an effect on the cost of a new home as well as on decks and remodels.
Lumber prices had been falling this summer, but that appears to have been short-lived. In August, lumber prices had bottomed out, but framing lumber is now up by 40% since then.
Lumber prices still remain below the peak reached in May of about $1,515 per 1,000 feet. On Tuesday, lumber futures were trading for about $735.70 per 1,000 feet, more than double the prepandemic five-year average of around $356, National Mortgage News reports.
But housing analysts warn that lumber prices aren’t finished climbing.
Lumber is critical for both the new-home construction process and remodeling. High lumber prices were being blamed for price increases in the new-home market. In May, builders reported that soaring lumber prices were adding $36,000, on average, to the price of a new home.
It looked like the new-home industry was going to catch a break this summer when lumber prices started to plummet. However, pent-up demand refueled the market and is leading to another round of price increases, Scott Reaves, director of forecast operations at Domain Timber Advisors, told Fortune. Also, supply shortages are pressing on prices.
“We expect the demand for lumber to continue increasing through 2022 and beyond in response to demographically driven housing needs, which will bode well for not only lumber mills but forestland owners,” Reaves said.