In June, lumber prices plummeted.
Carolyn Cole is a photographer.
Three key trends are driving the red-hot commodity upward, as evidenced by the fact that lumber prices are scaling above seven-month highs.
The highest level for lumber futures in more than a year was reached on Friday. They're close to their record high of $1,711, which was reached in May 2021.
The CEO and managing partner of a firm that specializes in timberland investment said that lumber's price will stay above $1,000 per thousand board feet through the second quarter of the year.
He thinks the price of the commodity should be around $500-$600 per thousand board feet, but he identified three key trends that are contributing to lumber's upward pricing pressure.
1. Millenials are buying their first home.
The pressure on housing demand is being put on by an aging population that has graduated from student debt to mortgage debt. The generation in their early 30s is roughly the same age as when their parents bought their first homes, and they want to do the same.
They are still making inroads into the country's housing market despite sky-high inflation and massive home price appreciation. The result has been a nearly unprecedented real estate boom, aided by an economy that allows most of them to work anywhere, as Insider previously reported.
According to Insider, 1.7 million new housing starts were seen in December. Lower interest rates and high lumber prices are going to happen.
The data from the National Association of Realtors shows that the younger generation comprised 37% of the homebuyers.
2. There has been a rise in Canadian lumber tariffs.
The US Commerce Department confirmed in November that it will impose a 18% tariffs on Canadian lumber imports in 2022. The rate was more than double during the Trump administration.
The Biden administration's plan caused some lumber yards to stock up and increase their orders before the tariffs kicked in.
"That is a significant increase," he said. Canadian lumber is going to drive up US prices.
The move will make housing less affordable for Americans, and it will affect the economic recovery. Half of the major producers of lumber in North America are located in British Columbia, and the US imports roughly 50% of their output.
3. The cost of raw goods has increased.
The price of timber, the wood that is processed to become lumber, has increased from 10% to 20%. He said that this is causing a supply-demand imbalance.
He told Insider that he expects timber pricing to stay strong for the next three to four years. The demand for lumber increases as the supply of timber becomes more constrained.
Other factors can be.
The December floods in British Columbia, which caused a temporary halt in lumber exports, have put pressure on lumber prices. According to the BC Lumber Trade Council, Canada's westernmost province exports 50% of its lumber production to the US.
Business Insider has an original article.
