Lumber prices fell off a cliff in June after climbing that mountain at a record pace during the pandemic.
The price plummeted 41.8% last month, from $1,267.50 per thousand board feet June 1 to $737.40 on June 30, according to the Nasdaq website.
The steep decline happened after a record high of $1,670.50 on May 7. That was an increase of more than 600% since April 2020, according to CNBC.
However, the futures market rate for lumber hasn’t resulted in lower costs for builders and home buyers yet.
“While we are hopeful that lumber prices will begin to stabilize and have a direct impact on home building, we haven’t seen the prices come back down yet on our end,” said Justin Olear, president of the Builders and Remodelers Association of Delaware.
Olear is also vice president of operations and construction at Regal Builders, a family-owned company founded over 35 years ago, based in Dover. He said he and his family have never seen lumber prices fluctuate so dramatically.
Rusty Dukes, co-owner of Dukes Lumber in Laurel, said he’s seen prices of some types of lumber fall, like spruce used for framing homes, but others are just leveling off. Meanwhile, many buyers are waiting on the sidelines.
“A lot of builders are saying, ‘This is ridiculous. I’m not going to build at this level.’ A lot of projects are on hold,” Dukes said. “Most of the buyers, like us, are staying out of the mix for fear it could fall further.”
One of the key building materials that hasn’t dropped in price yet is oriented-strand board, OSB, which has become more popular than plywood in North America, according to the International Association of Certified Home Inspectors. The panels are manufactured from heat-cured adhesives and rectangular-shaped wood strands that are arranged in cross-oriented layers.
Dukes said 18 months ago the price per sheet was about $9, but it has skyrocketed to about $63. He said he’s never seen prices increase so quickly.
“I’ve been in the business for 44 years, and I’ve never seen anything of this magnitude,” Dukes said. “In the past, I had seen prices rise and fall, and OSB got as high as $23 to $25, but never up to $63. That’s just unprecedented.”
The situation in Delaware is similar to the national outlook, according to Chuck Fowke, chairman of the National Association of Home Builders.
In a USA Today report, Fowke said while many builders are getting permits to construct homes based on the high demand for housing, they have stopped work to see what happens with prices and supplies.
Fowke is a home builder in Florida, and three of his would-be clients who went through the design phase have not signed contracts.
“They’re not going to build now,” said Fowke.
His customers are worried that if they pay the high lumber prices now, they’ll regret it if supplies start flowing and costs ease further, he said.
“They’re looking at the commodities market almost like Las Vegas, and they were looking at prices that were $1,600” per thousand board feet, he said.
Heather Stegner, a spokeswoman for the American Wood Council, a trade association that represents North American wood products manufacturers, told USA Today that various issues have caused an imbalance between lumber supply and demand. Those problems include the permanent closure of mills during the Great Recession, pandemic-related supply chain constraints and explosive demand for housing.
But she said she expects conditions to improve.
“Sawmill capacity increased by 1.4 billion board feet in the last year,” she said, adding that another 1.6 billion board feet could come online in the second half of 2021.
New home sales stall
Meanwhile, sales of newly built, single-family homes fell 5.9% in May to 769,000, according to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
Robert Dietz, chief economist for the National Association of Home Builders, said the slowdown in sales has been caused by both the buyers and the builders.
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“While higher prices have shifted some buyers to the sidelines, NAHB survey data indicates that approximately 20 percent of builders have limited sales activity in recent months in order to manage supply chains of materials and labor availability,” said Dietz in a press release.
The number of new homes sold on which construction hasn’t started is up 76% over the last year, Dietz said. The count of new homes sold that are completed and ready to occupy is down 33 percent.
The median sales price in May was $374,400, up 18% from $317,100 in May 2020.
“Entry-level buyers are being most affected by higher prices,” said Dietz. “Just a year ago, shares of sales priced below $300,000 accounted for 44 percent of sales, while this May it has dropped to 26 percent.”
Reporter Ben Mace covers real estate and development. Reach him at [email protected]