GettyAlthough Lumber may be at its lowest point since the pandemic, the stage is set for a possible rally of 65% by 2021.The outlook is influenced by three factors: Biden's infrastructure agreement, the demand for homes and seasonal trends.Joshua Mahony, IG stated that the losses seen over recent months could soon provide another major buying opportunity to bulls.An analyst says that although the lumber price may have fallen from its peak of pandemic proportions, the pieces are ready for a rally of as high as 65% by 2021.Lumber futures were trading at $603 per 1,000 board feet as of July 30, 64% less than the record of $1,711 set in May. The commodity traded at $448 per thousand boards feet a year ago.With the bipartisan $1.2 trillion infrastructure deal in Congress, a continuing rise in housing prices due to near-zero rates and seasonal historical trends, there is a good possibility lumber prices will increase again to as high at $1,000 per 1,000 board feet according to Joshua Mahony senior market analyst at trading platform IG.The infrastructure deal would primarily be used to build roads and bridges. This would increase the demand for lumber and other building materials. Many Americans still build or renovate homes and continue to build new ones.He also cited seasonal factors as a reason for his outlook.Mahony stated that the last quarter of the year is a typical "buoyant period" for lumber. The commodity ended up in the green in nine of the twelve fourth-quarter periods, with the three quarters that saw lumber slip notching losses of less than 5 percent.He stated that there is good reason to believe that the recent losses could soon enough provide another major buying opportunity for bulls to regain dominance.Mahony also said that it was not unusual for gains to be erased in the first half year.Mahony stated that historically, a reversal results in a bullish correction to regain lost ground. This will bring us back to a positive year end. "This pullback is actually part of a seasonal trend which typically results in a dramatic recovery towards end of year."Lumber prices rose sharply in the first year of this year due to concerns about a hot housing market and the millennials becoming home-buyers. As consumers took in the sky-high prices, and the economy opened up again, demand has slowed.
