However panic buying by contractors could create a bubble.
The worst may actually be behind us for lumber prices, CoreLogic Construction Expert Glenn Bearden said in a recent company podcast.
US lumber prices were up 54% year over year as of the second quarter, but Bearden asserted the market forces and human element that combined for a perfect storm for the increase have dissipated. “There’s been a noticeable decrease in market pricing. And it all seems to coincide with the pandemic and how things are beginning to wane,” said the CoreLogic expert.
However, he predicted prices will decrease more slowly for the consumer because suppliers are better positioned right now to earn a little bit more with the falling rates for plywood and other lumber.
Bearden said part of the perfect storm from the human element that led to the price hikes during the pandemic was that people felt cooped up since they hadn’t left the house in a year and a half and wanted a bigger home or renovation of the space where they lived.
“With all these new starts, prices steadily began to increase. Contractors are seeing this and therefore they began to buy in bulk. So when you put all of this together, these contributing factors, it started making prices go up, and up, and up, and up. And all contributing to what? A demand that could not be satisfied,” Bearden said.
He added the US tariffs imposed on Canada in 2018 also contributed to the price increases last year.
Looking ahead, Bearden said people he has talked to at sawmills claim they don’t have the shortage of lumber analysts were predicting.
He urged those in the real estate industry to be open-minded and patient. Without patience, he said panic buying by contractors with materials and housing could create a bubble.
Earlier this season, the National Association of Home Builders said the rise in lumber prices had made new homes out of reach for many low-income Americans. Lumber, which added $35,000 to the average price of a new home from April 2020 to April 2021, was listed as a major factor for the affordability issue.