Lumber Prices Soaring 14% As Supply Shortage Looms Ahead of Homebuilding Season
The lumber market could see fluctuations in 2023, as the commodity crucial for homebuilding has experienced a 14% soar in the past two weeks.
After a challenging 2022, where lumber prices tumbled over 60%, the industry may see a resurgence as mortgage rates decrease and the supply situation becomes clearer.
The average 30-year fixed mortgage rate has decreased from 7% in October to around 6.15% currently.
Should mortgage rates continue to fall, it could boost demand for home purchases as cheaper borrowing costs make buying a house more accessible.
As the homebuilding season is near by, supply shortages and soaring prices will add a few challenges.
At the same time, the outlook of homebuilders appears to be improving as sentiment has risen in January for the first time in a year.
The improvement is partially attributed to lower mortgage rates and a significant increase in homebuilder stocks indicating that the housing market may not be as weak as some believe.
If the demand for homebuilding increases, it could drive up demand for lumber as well. This comes at a time when supply is limited, as reported by building products wholesaler Sherwood Lumber.
During the sharp decline of lumber prices last year, North American suppliers adapted their production to align with the new market demand, resulting in less lumber inventory and restricted growth in future production, as sawmills adapted to the new reality of low prices, as per the statement of Sherwood Lumber’s COO, Kyle Little.
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