- Lumber prices soared above $1600 for the first time in history this week.
- The rise comes amid falling supply and increased demand for new homes and renovations.
- Lumber-related stocks are soaring in response and the average price of a new single-family home has jumped by $35,872.
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Lumber prices topped $1,600 per thousand board feet for the first time ever this week as the ongoing homebuilding push continues to drain lumber producers already lagging supply.
Stocks related to lumber are soaring in response.
Shares of Weyerhauser and West Fraser Timber are up 35% and 62% while Boise Cascade, Resolute Forest Products, and Universal Forest Products are up roughly 58%, 200%, and 63%, respectively over the past six months.
Lumber demand is so strong that Resolute Forest Products order book has exceeded its inventory, according to the company’s CEO Remi Lalonde, per Bloomberg.
Weyerhauser also reported a record quarterly profit last week, citing strong demand and rising lumber prices as key catalysts.
According to data from the National Association of Home Builders, the lumber price boom has pushed the price of an average new single-family home up by some $35,872 over the past twelve months.
Rising home prices look set to continue as well, according to Weyehauser’s president and CEO, Devin W. Stockfish.
“As 2021 progresses, new residential construction activity is exhibiting remarkable momentum, and repair and remodel demand remains very favorable,” Stockfish wrote in his firm’s April 30 earnings release.
However, home builders won’t be able to push costs onto consumers forever. The median sale price of existing homes surged by a record 17.2% in March to an all-time high of $329,100, according to data from the National Association of Realtors.
“This can only last for so long before affordability becomes pinched and demand pauses,” John Lovallo, a lead home builder analyst at Bank of America told CNN.
Carolina Millworks owner Jimmy Cox told the Andalusia Star News that there has been a “perfect storm” of supply and demand constraints which have caused lumber prices to soar.
“It really comes down to supply and demand,” Cox said. “Part of it is labor force and part of it is a shortage of raw materials. With all of those factors, it is kind of like a perfect storm.”
Cox added that his company has been open for 20 years and this is the busiest they’ve ever been.
“Even with the price going up, people are still coming in,” Cox said. “I’m hoping the price is going to go down. It has to go down or people will stop building.”