Lumber Prices Soar To New Records Amid Housing Construction, Renovations
The ongoing demand for housing has caused home prices to soar across Canada and the US, as buyers take advantage of low borrowing costs and more spacious accommodations during the pandemic. However, the ongoing demand for new housing has sparked a price surge in lumber, as producers struggle to restock inventories.
According to Statistics Canada, the New Housing Price Index was up 5.4% year-over-year in January, marking the largest increase since March 2008. The national index has remained at elevated levels largely due to the declining supply of new homes, and continued high demand for more living space amid pandemic lockdowns.
According to the Canada Mortgage and Housing Corporation, single-family housing completions in 2020 declined 2.2% from the year prior, and were down 15.2% compared to 2018. Despite strong demand as a result of homes selling quickly, finished single-family houses that were available for sale in December 2020 decreased by 29.4% compared to the same period a year prior.
However, the demand for new housing, coupled with the home-renovation boom in both Canada and the US has not only sent home prices soaring, but lumber prices as well. Lumber futures surged to a record US$1,004.90 per 1,000 feet of board on Thursday, marking the eighth session of increases. Prices have risen by nearly 40% since the beginning of the year, giving rise to concerns among home builders in the US, prompting some to even call on the Biden administration to help boost supply.
The rise in lumber prices will likely lead to a modest increase in the overall cost of a new home, and could potentially even disrupt some homebuilders’ projects. In addition, the surge in demand has put additional pressure on producers, many of which have been struggling to restock lumber supplies, further supporting the increase in prices.
Information for this briefing was found via Statistics Canada, the CMHC, and Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
