From Market Insider
- Lumber prices on Friday marked eight consecutive weeks of losses.
- Prices for the key building material have slumped 56% from their peak set in early May.
- Lumber prices have pulled back on signs of easing inventory shortages and some demand softening.
Lumber prices extended a string of losses last week, leaving prices for the key building material slashed by more than half from their peak on a mix of factors including easing shortages.
Lumber prices fell for an eighth straight week as they lost roughly 5%. The weekly decline was spared from a deeper contraction, however, as prices on Friday picked up about 1% to trade at $741 per thousand board feet.
But the weekly performance highlighted persistent weakness that’s been stalking prices since they began descending from their peak of $1,670 per thousand board feet on May 7. Wednesday marked the end of trading in June and prices closed the period with a fall of 45%, the worst monthly drop since 1978.
Prices as of Friday from the May peak have tumbled about 56%.
Lumber prices soared earlier this year, building on gains from mid-2020 as demand for the material kicked higher as people stuck at home by the COVID-19 pandemic embarked on home improvement projects. Meanwhile, demand for new homes was strong in an environment of low inventory of existing homes.
But the direction of lumber prices reversed course and moved lower, in part as sawmills have picked up the pace of output after the coronavirus crisis forced work stoppages. About 3,000 sawmills in the country have ramped up production, according to The New York Times, with a large focus on Southern yellow pine found in East Texas to the Carolinas.
Prices also softened on signs of slowing demand with homebuilders delaying projects partly to keep hold of their inventory of building materials.
Bank of America on Friday noted it’s seeing signs of inventory shortages for lumber and other home improvement categories such as appliances and cabinets beginning to ease.
“For retailers like Home Depot and Lowe’s, lumber/building materials and appliances are two of the largest categories as a percentage of sales,” wrote Elizabeth Suzuki, a research analyst at BofA, in a note published Friday.
“While improving supply is likely a positive for the retailers’ transaction counts (as in-stocks are particularly critical to professional customers who purchase frequently), it may be met with an offsetting decline in average ticket as pricing normalizes,” she wrote.