In February we posted an article about the rising lumber costs and how a reduction in Canadian tariffs had the potential to possibly lower or cap these costs. With so much new construction here in the Upstate this was definitely a welcome relief to both home buyers and builders, especially since it’s been determined the increase in lumber has added almost $36,000 to the construction cost of a new home.
The Canadian Tariff Factor
Now six months later lumber prices are still high, which is ironic considering how optimistic the National Association of Home Builders was when the United States Commerce Department reduced Canadian lumber tariffs from over 20 percent down to around 9 percent. Before early spring 2021, the Canadian tariffs, along with a major increase in new home construction, contributed to the rapid rise in lumber costs. NAHB Chairman Chuck Fowke told Timberline magazine, “The Commerce Department’s action to reduce duties on softwood lumber shipments from Canada into the U.S. is a positive development, but more needs to be done. Tariffs have contributed to unprecedented price volatility in the lumber market in 2020, leading to upward pressure on prices.”
What Does the Future Hold for Lumber Costs?
Just like about everything else in the world, it’s all about supply and demand. And while the decrease in tariffs were able to lower lumber prices coming from Canada into the United States, the pandemic wiped out any potential savings for any sector that utilizes wood. But the Federal Reserve believes that the price spikes we’ve seen so much of over the past 15 months are subsiding and will continue to diminish as the economy begins to normalize.
A May 24th, 2021 Fortune magazine article also believes the worst price fluctuations may be coming to an end. While thousand board feet prices are still extremely high compared to before the pandemic, Fortune reports the July futures contract price has fallen over $300 per thousand feet of two-by-fours. And a June 21st, 2021 New York Times article agrees, stating lumber prices in the futures market have slipped below a $1,000 per thousand board feet for the first time this year.
Of course everything at this point is speculation. Lumber industry veteran Kyle Little, when interviewed by CNBC, said that “volatile trading and elevated prices” will continue for the “foreseeable future” and while “prices could come off their highs” they will “still be above historic averages.”
So basically the general consensus is yes, prices will eventually stabilize, though no one knows exactly when. But when it does occur prices will be lower than what they were at the peak, but never again drop to where they were in the past.
Ready to pull the trigger and get started on your new custom home or current home rejuvenation? Compass Construction is here for all your home construction needs. Connect with us today by calling 864-627-8804 or drop us an email at inquires@buildcompass.com. Compass Construction: When only the best will do.