McCreath: Lumber hitting US$996 is a 'ridiculously high number'
The relentless rise in lumber prices shows no signs of abating as the pandemic keeps people at home, spurring a home-renovation boom.
Lumber futures climbed to a record US$1,004.90 per 1,000 board feet Thursday, rising for the eighth session in nine. Prices have climbed about 40 per cent this year, fueling concerns for home builders across the U.S., with the biggest industry group calling on the Biden administration to help boost supply.
“There’s just tremendous optimism that there’s going to be plenty of demand to build homes,” said Shawn Hackett, president of Hackett Financial Advisors in Florida. “We’re in a bubble mentality that is unsustainable. It’s a classic bubble scenario.”
Prices have been spurred by strong demand amid a boom in home remodeling and construction fueled by stay-home orders. The onslaught of demand has handicapped producers’ abilities to restock inventories quickly enough, further supporting prices. The rally has stoked concerns of inflation bleeding into the home-buying market.
Earlier this month, the National Association of Home Builders urged the U.S. government to help improve supplies. The administration needs to remove import tariffs on Canadian lumber and producers need to boost output, the group said.
Lumber’s surge in February is “adding thousands of dollars to the cost of a new home and causing some builders to abruptly halt projects at a time when inventories are already at all-time lows,” Chuck Fowke, the group’s chairman, said in a report Wednesday.
With homebuilding and renovation projects picking up in the spring, that could further exacerbate demand as producers across North America face timber and staffing constraints, said Kevin Mason, managing director at ERA Forest Products Research in Kelowna, British Columbia.
“It’s the first time it’s been up in the four-digit realm, and it was somewhat expected given how intensely tight the market is and the lack of supply response,” Mason said. “Inventories are lean throughout the supply chain. There is no surge in lumber production that is possible.”
Futures jumped as much as 1.8 per cent to an all-time high of US$1,004.90 per 1,000 board feet. Mason expects prices will keep rising before peaking around March or April. Hackett said prices are “too high” and that the rally is unlikely to last beyond springtime.