Lumber’s price has fallen from the lofty heights it hit last month because of concerns about a cooling housing market linked to higher mortgage rates and supply-chain issues.
A Business Insider reported that lumber prices have fallen 30% in the past two weeks, hitting an all-time low of $934 per thousand board feet on Tuesday. The prices were at $1,338 just two weeks ago.
The lumber industry is experiencing its longest slump since July, according to Bloomberg.
Rising mortgage rates contributed to part of the decline, which some industry experts believe will lead to slower home sales in the future, MSN reported.
According to Freddie Mac, the 30-year fixed-rate increased by 50 basis points from late December 2021 to late January.
The Mortgage Bankers Association projects that in 2022, the rate will rise to 4%, according to GOBankingRates. Already, home sales have been affected.
The National Association of Realtors reported last week that U.S. pending home sales in December decreased by 3.8% from a month earlier and 6.9% from a year earlier.
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“The market will likely endure a minor reduction in sales as mortgage rates continue to edge higher,” said Lawrence Yun, NAR Chief Economist.
Slowdowns aren’t likely to last forever, though. There are a limited number of housing options available in the United States, despite the high demand.
Freddie Mac estimated that there are still 3.8 million unsold homes on the market.
While lumber prices continue to drop, there has been volatility since the COVID-19 pandemic began.
Bloomberg reported that building boom prices peaked during the pandemic, but then dropped sharply as sawmills accelerated production and high prices caused a decline in sales.
An industry-wide supply chain problem keeps getting worse for the lumber industry.
British Columbia, a major lumber producer, experienced flooding in late 2021 that disrupted supplies and shipments, Bloomberg reported.
Vaccination mandates for COVID-19 have also disrupted shipments across the Canadian-U.S. border, and there are fewer drivers available to transport lumber from Canada to markets in the United States.
