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Lumber Price Bubble Bursts

(Photo courtesy of Liza Summer from Pexels)

Since my last column, most cash lumber prices fell hard. Lumber futures for July delivery dropped 40 percent from record highs reached in early May. Economists, investors, and many of you wondered if sky-high prices would doom the shed building and the housing market.  

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Some builders stopped selling product before the buildings were completed. The question on many buyers’ and sellers’ minds was just how low lumber prices would fall.  

Lumber producers and traders that we talked to expected prices to remain relatively high due to the strong housing market. However, the supply constraints due to the pandemic were winding down. 


The housing market rebounded in May, but construction continued to be hampered by expensive lumber and shortages of other building materials. 

Lumber prices had increased 150 percent year over year in May. Housing starts rose 3 percent to 1.572 million starts but permits declined. The Federal Reserve raised its expectation for inflation and brought forward the timeline on when it will next raise interest rates.  

For now, they did not change the short-term borrowing rate.  


Abundant lumber supplies in the distribution system pushed down prices.   

SYP 2 by 4 #2 prices were lower by more than 30 percent at the end of June from the previous three weeks. Canadian Eastern and Western SPF 2 by 4 #2 and better prices crashed over 35 percent in the same period. 

Premium dimension grades dropped with #2 prices. Premium stud prices decreased at a slower rate than the rest of the market. 

Strong demand was attributed to some segments of the market (i.e., home builders and truss manufacturers). However, lackluster demand from lumberyards and home centers was a factor in the lower price action.


Consumer demand for housing will keep a floor on lumber prices, but many market participants predicted that price levels will likely be much lower than the second quarter of 2021. 

Although we have not seen the end for sudden and dramatic price swings, we could see the current trend continue for the rest of the year.  

If you have any questions about the market or your strategy you can always reach out to me.

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