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Analysts expect that the price of lumber will rise again in early 2022.
Insider has learned that another wave of renovations is a reason for lumber's price rise.
Analysts don't believe lumber prices will roar back to pre-pandemic levels.
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The pandemic's most popular commodities, gold, is making a comeback. It has risen 50% since August and gained for the sixth consecutive week.
Experts told Insider that the price of lumber will continue to rise through early next year after falling steadily since May's all-time high.
Lumber futures were trading at $713 per thousand boards feet as of October 8, which is 58% less than the record $1,711 set in May. This was due to supply chain disruptions and increased demand for housing. The lumber futures traded at $586 per thousand board foot a year ago.
However, prices dropped to below $400 per thousand feet in August and have since rebounded by $100 per thousand feet in just over one month, according to Fastmarkets Random Lngths Framing Lumber composite price data.
According to Dustin Jalbert (senior economist at Fastmarkets), the reason for the lumber price rise is that renovation demand has increased slightly after price-sensitive homeowners decide to go ahead with home improvements now that wood prices are stable.
Jalbert doesn't expect the same runup in lumber prices as earlier this year, a time when there was a backlog and a shortage key construction supplies. However, pandemic-related supply restrictions continued to ease.
Jalbert stated that the market had finally become more balanced than it was in the summer months. This ultimately led to the huge correction in prices since May's record-high levels.
He said that even though Americans want to renovate and build homes, their lumber consumption is being hampered by a shortage of siding, windows, cabinets, appliances and garage doors.
Jalbert stated that the supply side continues to face difficulties. Log costs in British Columbia (which accounts for approximately 16% of North American lumber production capacity) remain high.
He noted that the tariffs on Canadian lumber could also double, from 9% to around 18% by November, depending on the final determination of Department of Commerce. Jalbert explained that such an outcome would increase lumber production costs, which will eventually push lumber prices higher.
Chip Setzer, the director of trading growth and trading for Mickey Group, a commodity trading platform said that he doesn't see lumber prices rising above $1,000 per 1,000 board feet. Although prices have been historically high, he believes the current range that lumber prices are in is fair.
He said that he liked that price and that it may have moved higher than the $300 per thousand feet that was pre-pandemic. It's good for forests. It's also good for the men who work at the sawmill. It's good for everyone."
Setzer said that although the market will see a slowdown in the year-end, there will be an increase in activity by the second quarter next year. He said that people are still not well-housed.
At the beginning of the year, lumber prices soared along with energy prices like oil and natural gas and used car prices. This drove up inflation to its highest level in 30 years. As consumers have absorbed the high prices and the economy has reopened, the demand for commodities has slowed.
