Rising Lumber Prices; Again a Challenge to Construction Industry?

Over the past year and a half, the US building construction industry has been buffeted by a wide range of issues – COVID-19, shortages of labor and raw materials, and surging prices for materials when available. For many in the construction industry, high lumber prices were perhaps the most pressing issue. Given the ubiquity of lumber in construction jobs – from building decks to making structural framing – high lumber prices bedeviled builders, contractors, and consumers for most of the second half of 2020 and the first half of 2021 before prices returned to their pre-pandemic norms.

Now, however, lumber prices have started to rise again, causing angst among the construction industry. While prices – about $700 per thousand board feet – are far below the $1,700 peak seen last year, their rise – at a time when inflation is affecting so many other items (such as gasoline, fasteners, and other building components) – is a concern:

• A prolonged surge in lumber prices may negatively affect home prices at a time when there is a shortage of affordable housing.
• Consumers buffeted by rising prices for a wide range of consumer goods may cancel previously planned home improvement projects.
• Contractors may sacrifice profitability to keep getting bids – a strategy that only works in the short term!

Some feel that this increase in lumber prices in a temporary blip – the onset of winter will bring a reduction in many construction jobs, allowing supplies to increase and prices to fall. Others, though, are concerned that this increase is a harbinger of another round of prices. Freedonia analysts will continue to monitor lumber prices and their effects on the construction industry as a whole.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in the Construction and Building Products. Freedonia Custom Research is also available for questions requiring tailored market intelligence.