The skyrocketing cost of lumber, explained
Photo courtesy of The Hustle
From The Hustle
Wood is typically used for building roofs. Now it’s known for blasting through them.
Lumber prices are up nearly 260% since April 2020, following a perfect storm of surging demand and diminished supply.
And it all started with a simple backlog...
At the start of the pandemic, sawmills anticipated weak demand and limited production by up to 30%. To their surprise, demand turned out stronger than ever:
- DIY boom: While the US economy shrank 3.5% in 2020, spending on home improvements and repairs grew 3%+
- Low interest rates: In December, US new housing starts hit a 14-year high
Despite wood production hitting a 13-year high in February, supply hasn’t caught up with demand -- and now ~70% of builders are raising home prices to slow demand down.
The result is a $24k+ increase in the average price of single-family homes since April 2020.
European beetles are now coming in clutch
Not those European beetles. A literal beetle infestation across Europe is boosting logging there, and Europe’s share of US lumber imports reached a record high of 13% in 2020.
Those imports are critical to the US lumber supply as British Columbia has reduced production by over a third in 5 years.
In conclusion… (We wanted to end this piece with a joke about lumber, but we just couldn’t think of any that wood work.)
Low Interest Rates,