Construction costs remain high. But one of the biggest headaches for builders — obtaining lumber at a steady price — may be normalizing.
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The price of lumber remained near pre-pandemic levels over the past week even as it began to tick upward again, a level of stability that homebuilders could not rely on recently.
Lumber futures on Monday closed at a price just under $453 per thousand board feet, a nearly 5 percent increase since Sept. 28, according to numbers tracked at Nasdaq.com.
Still, prices remain at a fraction of their pandemic peak when they topped $1,500 for the same amount of lumber.
Lumber futures, last six months
It’s been a bumpy ride for homebuilders as they have tried to navigate escalating prices and strained supply chains while striving to meet an enormous pandemic-fueled demand for new homes.
But in recent months, the demand for new homes has come back down to earth as mortgage rates pushed the price of new homes out of reach for many Americans.
Fewer sales have meant fewer new construction projects and less strain on the supply chains for building materials.
Lumber is only one of these materials. But it stole the headlines for much of the last three years because of the sheer volatility of its cost. Prices started near $400 per thousand board feet before the pandemic. About a year later, the same amount of lumber would cost nearly four times as much. And over the course of 2021 and 2022, the price zig-zagged downward and upward by hundreds of dollars in a dizzying fashion.
Builders, meanwhile, had to purchase enough material to keep making progress on these monthslong construction projects. Prices this volatile have made it difficult to plan monthslong construction projects.
Including lumber, the cost of all construction goods appears to have peaked in June at levels 40 percent higher than in February 2020, according to the U.S. Bureau of Labor Statistics’ producer price index.
But the cost of all construction materials — including goods like brick, drywall and cement — has not fallen as quickly as lumber alone. As of August, inputs to residential construction had only dropped 2 percent from its peak in June.
By that point, lumber prices had already undergone much of their decline, hovering at roughly $600 per thousand board feet. But as the government reports construction material costs from more recent weeks, the numbers will likely reflect the continued fall in the price of lumber.