According to NAHB, softwood lumber prices have been extremely volatile in recent years, which continues to wreak havoc on homebuilding costs. As NAHB writes: “Surveys conducted by Home Innovation Research Labs show that the average new single-family home uses more than 2,200 square feet of softwood plywood, and more than 6,800 of OSB, in addition to roughly 15,000 board feet of framing lumber.”
That’s a lot of wood, and thus, a lot of volatility. This issue, coupled with higher interest rates and worker wages are adding to the crunch and pinch of housing unaffordability, per NAHB.
[See Producer Price Index on 10 key industry commodities here.]
NAHB offers a quick rundown for lumber yards and suppliers, too, noting that “with falling prices, higher prices reach builders much more quickly when market prices are increasing.” NAHB continues: “Retailers generally have less buying power than wholesalers have selling power. In such a scenario, the retailer (e.g., lumberyard) is said to be a ‘price taker.’ As a result, their inventory costs tend to increase in step with market prices. These higher costs are passed on to builders in order to maintain positive operating margins. This is why lumber retailers are less likely than wholesalers to realize outsized profits when prices are rising.”
What are you seeing with lumber prices, and what do you foresee moving forward? Regardless, it may be wise to buckle up for more lumber pricing volatility and to prepare accordingly.