If you planned on building a new deck or adding a new addition, then hopefully you were able to get the lumber needed before the start of 2021. In recent months, lumber prices have soared by over 300% and show no signs of returning back to normal. Since the COVID-19 pandemic lumber prices have reached record highs of $1,459 per thousand board feet.
As Fortune noted, the “scarcity of a formerly plentiful and cheap commodity” has further constrained the much-needed construction of new homes as “Homebuyers across the nation are up against one of the tightest housing markets in modern history.”
But why is there even a lumber shortage in the first place?
One of the main reasons is sawmills struggling to catch up from the widespread layoffs as they worked to massively scale down production in the early months of the pandemic. According to Fortune, U.S. wood production was down 16% by April 2020, compared to January 2020.
Even though wood production had recovered to above pre-pandemic levels by the summer, it was still “far behind the boom on the demand side.” The limited capacity of existing sawmills combined with the mill’s ability to keep up with demand has fueled the surge in lumber prices.
According to Fortune, the “do-it-yourself” market surged during the pandemic causing even more lumber shortages.
“Essentially from the start of the COVID crisis, do-it-yourself projects boomed. Americans were spending a lot more time at home and finally got around to knocking out projects,” reported Fortune. “During the first two months of the recession, home-improvement sales shot up 13%.”
This rapid rise in demand had an impact on the price, with home-improvement spending still high, up 29% in March 2021 compared to pre-pandemic levels.
During the pandemic, mortgage rates fell to record lows, with Fortune reporting that “fixed 30-year rates [bottomed] out at 2.65% in December.” Fortune also noted that this was partnered with a “five-year period when people born between 1989 and 1993, the biggest birth years for millennials, will turn 30 — entering the all-important first-time home-buying years.”
While housing inventory usually increases during a recession, these factors combined to cause a rapid decrease in the availability of homes. This only drove the demand for new housing, which requires lumber.
According to the National Association of Home Builders, “Soaring lumber prices that have tripled over the past 12 months have caused the price of an average new single-family home to increase by $35,872.”