Lumber prices tumble, dropping to five-month low in June

A steep drop in lumber prices is creating optimism for homebuilding for the second half of 2021.

Lumber futures ended June with a closing price of $737.40 per thousand board feet after starting the month at $1,267.50 and spiking to an all-time high of $1,670.50 on May 7, according to data from Nasdaq. While still above the year-ago rate of $431.60, it reached the lowest point since $700 on Jan. 20. The recent fall represents drops of 55.9% from May’s peak and 41.8% throughout the month — the largest monthly decrease on record dating back to 1978, according to CNBC.

For-sale home supply started making modest gains in the last two months, mostly a product of increased listings from more sellers entering the market. The latest housing start data from May showed monthly growth even as builder applications decreased to a seven-month low. Material constraints inhibited construction since builders had to pass down inflated costs to potential buyers.

Borrower demand remains strong and is expected to continue as larger swaths of younger generations plan to buy properties. Going forward, the more reasonable lumber prices should help the industry gain traction and catch up with lingering demand.

“When the virus hit last March, it paused the development and production of lumber because mills shut down for worker safety considerations,” Doug Duncan, Fannie Mae’s chief economist, said in an interview. “Demand for houses picked up before it filtered down to getting the lumber yards going again. I think the futures market suggests that they ramped up production and are making progress.”