Lumber Economic Update – Where are Things Headed?

The past year has been tumultuous for both businesses and consumers alike. The pandemic abruptly changed what was once a stable, confident economic environment into a host of circumstances that faced a significant number of unknowns. One of those unknowns centered around the drastic increase in the price of commodities such as steel, plywood, and lumber prices.   

Current Challenges

By now, it’s fairly well-known that plywood and lumber prices have skyrocketed in recent months. The unusual conditions in the past year saw homeowners finally having enough time to complete their DIY projects. They then proceeded to head off to their local building supply establishment in droves. This ultimately wiped out a fair amount of their inventory. Normally, supply could have kept pace with demand. However, suppliers had difficulty replenishing their inventory because trucking industries (and others), couldn’t find enough labor to move products from the forests all the way into retail stores. 

Additionally, even with all the difficulties in the past year, the historically low mortgage rates encouraged many to take advantage of the unprecedented rates. Many signed contracts to build their dream homes, thus furthering the demand for raw materials. 

Lumber Prices Returning to Normal?

It’s difficult to predict anything with a rock-solid certainty, especially when coming out of a very uncertain period of time. However, there are signs of stabilization. The threat of COVID-19 is leveling off. States are encouraging people to get off of unemployment and go back to work. This should help increase the ability of suppliers to bring products to their market.

Additionally, Forbes predicts that the latter part of 2021 will bring a gradual increase in mortgage rates. 2022 may bring forth even more significant hikes in rates. Predictably, high mortgage interest rates create a trend to normalize the public’s interest in homebuilding. By the end of 2023, demand for wood products should level off and return to normal.