Timber prices are poised to continue rebounding after hitting $1,000

  • Lumber prices moved back above the $1,000 level on Thursday as seasonal demand begins to pick up.
  • Wholesale and retail lumber inventories have been conservative in recent months, according to a lumber industry executive.
  • “Heading towards what is typical seasonal strength in the lumber market, a major buying round is upon us right now,” Sherwood Lumber’s Kyle Little told Insider.

Lumber prices reversed some of their March losses and climbed back above the crucial $1,000 per thousand board feet level.

According to an industry executive, prices of the essential building product could continue to rise during the summer months due to historically low inventory and a seasonally strong period for lumber as the season of residential construction is heating up.

“Wholesale and retail lumber inventories have been very conservative at historic lows throughout these first four months of 2022,” Kyle Little, COO of Sherwood Lumber, told Insider. “Now, heading into what is typical seasonal strength in the lumber market, a substantial buying round is currently upon us.”

This strength should help keep lumber prices in an above normal range over the next few months, around $1,000 to $1,400 per thousand board feet, according to Little. Lumber prices peaked at around $1,733 per thousand board feet last May.

Little’s comments join those of two other commodity experts who recently told Insider they expect lumber prices to rise 13% due to still tight supplies.

But that doesn’t mean lumber prices are out of the woods yet. In fact, Little sees long-term structural headwinds that could lead to weakness toward the end of 2022 and into 2023.

Primarily, an affordability crisis in the housing market, ongoing logistical challenges and higher interest rates are impediments to a sustained rise in commodity prices. Mortgage rates for a traditional 30-year fixed rose above 5% for the first time in three years earlier this month, and they continue to climb.

This spike in mortgage rates has made buying a home less affordable and led to a precipitous 40% drop in year-over-year mortgage applications earlier this month as consumers try to expect lower rates.

“We expect long-term prices to be challenged by affordability and rising interest rates, but the bulk of these won’t be reflected in commodity prices until well into the future. part of the second half of 2022,” Little said.

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