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  4. Lumber prices will continue to rebound into summer after reclaiming the $1,000 level as seasonal demand ramps up, industry executive says

Lumber prices will continue to rebound into summer after reclaiming the $1,000 level as seasonal demand ramps up, industry executive says

Matthew Fox   

Lumber prices will continue to rebound into summer after reclaiming the $1,000 level as seasonal demand ramps up, industry executive says
  • Lumber prices crossed back above the $1,000 level on Thursday as seasonal demand begins to pick up.
  • Wholesale and retail lumber inventories have been conservative in recent months, according to one lumber industry executive.
  • "Heading into what is the typical seasonal strength of the lumber market, a substantial buying round is currently upon us," Sherwood Lumber's Kyle Little told Insider.

Lumber prices have reversed some of their March losses and crossed back above the crucial $1,000 per thousand board feet level.

According to one industry executive, prices for the essential building commodity could continue higher into the summer months due to historically low inventory and a seasonally strong period for lumber as the homebuilding season heats up.

"Wholesale and retail lumber inventories have been very conservative to historically low throughout these first four months of 2022," Sherwood Lumber COO Kyle Little told Insider. "Now, heading into what is the typical seasonal strength of the lumber market, a substantial buying round is currently upon us."

That strength should help keep lumber prices in a higher-than-normal range for the next few months, roughly between $1,000 and $1,400 per thousand board feet, according to Little. Lumber prices topped out at about $1,733 per thousand board feet last May.

Little's comments line up with two other commodity experts who recently told Insider they expect a 13% pop in lumber prices due to continued tight supply.

But that doesn't mean lumber prices are out of the woods yet. In fact, Little sees some structural long-term headwinds that could lead to weakness towards the end of 2022 and into 2023.

Mainly, an affordability crisis in the housing market, continued logistical challenges, and higher interest rates serve as roadblocks to sustained higher prices for the commodity. Mortgage rates for a traditional 30-year fixed surged above 5% for the first time in three years earlier this month, and they continue to grind higher.

That surge in mortgage rates has made buying a home less affordable, and it led to a precipitous 40% decline in year-over-year mortgage applications earlier this month as consumers try to wait out for lower rates.

"We expect prices in the long term to be challenged with the affordability and rising interest rate headwinds, however the bulk of those will not be reflected in the commodity pricing until well into the second half of 2022," Little said.

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