Wood prices are expected to continue to recover after reaching $1,000
- Timber prices once again crossed above the $1,000 mark on Thursday as seasonal demand started to pick up.
- Wholesale and retail timber stocks have been conservative in recent months, according to a woodworking industry executive.
- Heading into the typical seasonal strength of the sawn lumber market, there’s currently a big buying round ahead of us,” Sherwood Lumber’s Kyle Little told Insider.
Lumber prices reversed some of March’s losses and moved back above the $1,000 mark per 1,000 feet board.
According to an industry executive, prices for a basic construction commodity could continue to rise in the summer months due to historically low inventories and a strong seasonal period for timber as the home building season heats up.
“Wholesale and retail timber stocks were very conservative to historic lows during the first four months of 2022,” Kyle Little, Sherwood Lumber’s chief operating officer, told Insider. “Now, heading into the typical seasonal strength of the timber market, a big buying round is currently upon us.”
That strength should help keep lumber prices in a higher-than-normal range for the next few months, between $1,000 and $1,400 per 1,000 feet of board, according to Tell. Lumber prices topped about $1,733 per 1,000 feet of plank last May.
Little’s comments are in line with two other commodity experts who recently told Insider that they expect a 13% rise in lumber prices due to continued tight supply.
But this does not mean that sawn timber prices are not yet available. In fact, Little sees some long-term structural headwinds that could lead to weakening towards the end of 2022 and into 2023.
Essentially, the affordability crisis in the housing market, persistent logistical challenges, and rising interest rates are barriers to continued high commodity prices. Mortgage rates for traditional 30-year stability rose to more than 5% for the first time in three years earlier this month, and continue to rise.
This rise in mortgage rates has made home buying less expensive, and led to a rapid 40% drop in mortgage applications year-over-year earlier this month as consumers try to wait for lower rates.
“We expect prices in the long-run to challenge with affordability and higher interest rates, but the bulk of it will not be reflected in commodity pricing until the second half of 2022,” Little said.