US Lumber Prices Skyrocket... Housing Renovation Demand Surges Due to COVID-19

[Asia Economy Reporter Byunghee Park] North American lumber prices are soaring to unprecedented heights. This is because the demand for lumber has significantly increased as people stuck at home due to COVID-19 consider home renovations. This phenomenon is unusual since lumber typically does not sell well during the winter season.

The Framing Lumber Composite Price, published weekly by Random Lengths, a company providing price information for the North American lumber market, recently rose to $966 per 1TBF, surpassing the previous all-time high of $955 recorded in September last year.

Random Lengths explained that there is a shortage of lumber supply used in new construction, with sawmills having orders backed up until March.

Wood Gift Price Trends [Image Source= Wall Street Journal]

As a result, the March delivery lumber futures price has surged 47% over the past three weeks, reaching $982.10 per 1TBF on the 12th. Currently, lumber futures prices have more than doubled compared to the same period last year. The lumber futures price surpassed the previous all-time high recorded in 2018 last August. At that time, the futures price was around $640 per 1TBF. In just over four months, it has soared about 50%, approaching $1,000 per 1TBF.

The May delivery futures price this year also rose to $830.90 per 1TBF, and the most front-month futures for March next year recently started trading at $695 per 1TBF. This exceeds the initial trading price of $639 per 1TBF.

Stock prices of lumber producers are also skyrocketing. West Fraser's stock price has quadrupled compared to the low point in March last year. This is thanks to the combined effect of rising lumber prices and merger and acquisition news. West Fraser acquired its competitor Norbord earlier this month.

The low mortgage rates, thanks to the ultra-low interest rate policy of the U.S. Federal Reserve (Fed), also seem to be stimulating demand for home purchases and renovations. In December last year, U.S. housing starts and building permits reached their highest levels since 2006.

Housing prices are also rising sharply. Large homebuilder PulteGroup announced that the average home sale price in the fourth quarter of last year was $462,000, up 7% compared to the same period the previous year. PulteGroup expects housing prices to rise further due to lumber prices.

There is also a forecast that rising housing prices could further fuel lumber price increases. This is because homeowners may think they can increase their home value through renovations when housing prices rise.

This content was produced with the assistance of AI translation services.