Lumber prices are continuing to drop from the sky-high levels reached this spring — but industry experts say those decreases haven’t yet resulted in lower home construction costs.
Supply shortages were met with elevated demand during the COVID-19 pandemic, driving lumber prices to historic levels. Futures prices tipped over $1,600 per 1,000 board feet in May, which is a jump of more than 300% from April 2020, according to the National Association of Home Builders.
Prices have steadily decreased since then, falling by more than 50% to just under $800 per board feet in early July. But they’re still higher than before the pandemic.
Will construction costs come down?
High lumber prices drove the average price of a new single-family home up by nearly $36,000 between April 2020 and May 2021 — pricing millions out of the market, the NAHB says.
But while lumber prices are decreasing, some experts say it could take some time for building costs — and home prices — to follow suit.
“While the price of framing lumber has dropped roughly 50% over the past seven weeks according to Random Lengths, prices paid by builders have declined by a fraction of that amount,” the NAHB wrote Wednesday. “The disconnect — which has always existed — is inherent to the lumber supply chain.”
The NAHB says home builders and remodelers will “begin to get price relief” once mill prices stabilize or substantially decrease “for an extended period.”
Fortune also reports that big-box retailers will start to lower prices on wood products as wholesale lumber prices fall.
But “each dip on the wholesale side” could take weeks or months to translate to store aisles, Fortune reports.
While decreasing lumber costs may not be reflected in the marketplace or construction costs yet, experts tell CBSDFW that they’re a “reliable predictor of what’s to come.”
“I kind of liken that to oil prices decreasing and then after a few weeks you’ll start to see it make its way to the pump,” Phil Crone, executive officer for the Dallas Builders Association, told the Dallas-Fort Worth TV station. “That’s what’s happening here. The future looks good.”
But experts also told the CBSDFW there are other factors keeping the costs of home construction and remodeling high, including disruptions to labor and the supply chain.
“Everything — labor, materials, all across the board — it’s all driving cost,” Thadd Reeves, co-founder of A. Gruppo Architects, told CBSDFW.
Why were costs so high in the first place?
Some sawmills were forced to shutdown at the beginning of the pandemic — putting a strain on supply.
At the same time, Americans stuck at home due to coronavirus-related restrictions stocked up on supplies for construction and do-it-yourself projects. Fortune reported that many potential homebuyers instead opted for new construction when record-low interest rates spurred a boom in the housing market.
The decrease in supply met with the increase in demand pushed lumber prices up, leaving the industry and government officials grappling with how to rebound supply and bring costs back down.
Even as lumber prices are decreasing, some industry experts have said costs could remain elevated above pre-pandemic levels for the foreseeable future.
“We moved up to extreme hyper-highs here over the first half of 2021 after a record move in 2020,” Kyle Little, chief operating officer at Sherwood Lumber, told Fox Business in June. “This adjustment that we’re going through right now is just that. We are seeing continued tremendous demand in the pipeline with continued supply chain problems throughout all parts of the lumber supply chain.”