There is no sigh of relief anytime soon for the off-site construction industry as Fortune predicts lumber will continue to climb in price.
Lumber prices are up 232% and ‘could spiral out of control in the next few months. Last week the price per thousand board feet of lumber soared to an all-time high of $1,188, according to Random Lengths. Since the onset of the pandemic, lumber has shot up a whopping 232%.
Homebuilders and Modular factories won't want to hear this, but the ceiling could be higher—maybe even a lot higher. On Monday, the May futures contract price per thousand board feet of two-by-fours jumped $48 to $1,420. That squeeze once again triggered the circuit breakers and caused lumber trading to halt for the day. Why would lumber yards and builders pay above-market rates? Severe lumber scarcity has buyers on edge. They're buying the sky-high contracts in order to ensure they'll actually get the lumber they need for projects already under contract.
This supply and demand mismatch is largely a result of the pandemic. At the same time that state-mandated lockdowns caused mills to halt production, bored quarantining Americans were rushing to Home Depot and Lowe’s to buy up materials for do-it-yourself projects. That caused lumber inventory to plummet. It only got worse from there: Recession-induced record-low interest rates caused a housing boom. In March, new housing starts hit their highest levels since 2006. Of course, new homes require a lot of lumber, thus exacerbating the shortage.
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Gary Fleisher is the Managing Director and contributor to the Modcoach Network and its affiliated blogs. Email at firstname.lastname@example.org
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