I’ve been keeping up with the rise and fall of the wholesale lumber market lately because, like many of you, when the board foot price of poplar or oak triples at your local big box retailer, it catches your attention. It’s not quite down to where it was this time last year but at least I don’t have to take out a loan to build the end table my wife is asking for.
So, what happened?
According to Lance Lambert of Fortune magazine, who’s been following this saga, there’s multiple reasons but basically it all boils down to supply and demand and these key drivers:
- Covid happened, which generated a ton of home improvements by both the pros and DIY’ers
- Home builders picked up production in Q3 of 2020 which had an immediate impact, and
- Interest rates dropped causing more home improvements in existing and newly-purchased homes
All of this conspired to drive wholesale lumber prices to $1,515 per 1,000 board feet in May. The good news: according to Fortune, as well as Home Depot’s recent earnings call, the price per 1,000 board feet dropped as low as $432 on 8/9 but has risen a bit to $520 on Friday’s (8/26) close.
Unfortunately, wood prices follow the same economic pattern as oil and gas prices when they rise and fall. That is, the price of gas goes up overnight when oil increases but takes forever to drop; up like a rocket and down like a feather as the old adage goes. Refiners, who purchased the higher priced oil still charge retailers based on what they paid for the oil, and only lower their prices after they sell off the higher cost supply. Same for wood.
According to market insiders we should see lower retail prices in September, but as small purchasers we’re still just a flea on the dog’s tail trying to hold on.
1. Lance Lambert, Lumber prices are down 74%. But this could drive them up again (Fortune, September 2, 2021)