Lumber prices have tumbled 70% in the last 14 weeks following a blistering rally as record-setting demand slows
Shannon Stapleton/Reuters
- The last 14 weeks have seen lumber fall to around $500 per thousand board feet, down 70% from its all-time high in May.
- Now some analysts are calling a bottom while projecting flatter prices in the months ahead.
- Even if lumber prices normalize around $500, that's still elevated compared to pre-pandemic levels.
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For how steep the run-up was, lumber's plunge has been even more disorienting.
Starting its ascent in late October 2020, lumber climbed to a peak of $1,711 over the course of seven months. But it took just 14 weeks to see all those gains erased.
The last 14 weeks have seen lumber swiftly give back its gains, with the latest prices - near $500 per thousand board foot - down 70% from its all-time high in May. Now, some analysts are calling a bottom while projecting flatter prices in the months ahead.
"We're going to see a stabilization," Mace McCain, CIO at Frost Investment Advisors, told Insider previously. "We're out of the panic buying. We're out of the massive industry shortages. We're out of the extremes."
McCain said that the housing market has been behind much of the movement in lumber. As a homebuilding boom swept the US, construction firms scrambled to get their hands on lumber, sometimes buying more than was necessary for fear of running out.
But now, higher prices have cured high prices in other areas. Expensive houses have dissuaded house-buying, putting downward pressure on lumber.
On the production side, a recent survey of lumber brokers and manufacturers, who once hoarded the commodity, found that 49% are now facing excess inventory - another downward signal. No surveyed lumber producers reported "very tight" inventory in July.
Ed Egilinsky, managing director and head of alternative assets at Direxion, previously told Insider that he expects $500 to be lumber's price floor and that it could even experience a rebound into the $600 region in the next 24 months.
To be sure, bouncing back to $1,700 is probably not on the cards, but Egilinsky said the combination of sawmill labor shortages, wildfires, and possible Delta variant shutdowns could crimp supply and give lumber a modest boost.
Other analysts are shooting a bit below $500. The commodities team at BMO Capital Markets looked at the share prices of three Canadian sawmill firms to derive a market-expected lumber price of $447 in 2022. Their result was first reported by the Wall Street Journal.
Yet even if lumber prices normalize a touch above or below $500, that is still a ways away from the old, pre-pandemic normal. By contrast, the average weekly lumber price in 2019 was $372. Between 2011 and 2019 - after the financial crisis housing bust had largely passed - the average was just $337.
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