Episode 13: Historic Lumber Price Spike Feb 2021
Below are the show notes and transcription for episode 13.
Lumber Price Charts
Source of Charts: Trading Economics
Episode Transcript 013 – Historic Lumber Price Spike Feb 2021
Welcome to another episode of the agent on duty podcast. I am John Marion and I am the Agent On Duty.
To access the show notes for today’s episode, and every other episode of the podcast, go to innovativeproperties.com/podcast and you can access the notes for every episode.
The Price of Lumber
In today’s episode, we’re talking about the price of lumber.
Lumber has spiked in price since Coronavirus started. And so I’m going to talk about that and how it affects you and your encounters in the real estate industry, whether you are a buyer or a seller or a, just a homeowner trying to do home improvement projects. Or, if you’re in the market for a new home, with new home construction, it’s affecting home prices big time.
So to get started with this podcast, I want to give you a little bit of background about how lumber is priced and the statistics historically, so that you can understand the context of what I’m talking about today and the main point that I’m going to make in today’s podcast.
Lumber Price Charts
And all these charts are available. I’m going to take screenshots of the charts that I’m talking about today and post them in the show notes. So go to innovativeproperties.com/podcast to access today’s show notes, to see visually what I’m going to explain to you.
So for today’s podcast, I’m going to go back in this statistics of lumber prices, 25 years to 1996. And before I get into the prices, I want to explain how lumber is priced.
Board Feet of Lumber
So in short lumber is priced by 1000 board feet and I’ll post a link. You can read more statistics about how that’s calculated, how a thousand board feet is calculated. I’m not going to get into the details for this podcast, because I want to focus on the pricing.
25 Year Lumber Price Chart
So per 1000 board feet of lumber, the price going back 25 years has been pretty consistent in the range that lumber has traded. And for the most part, it’s been between $200 per 1000 board feet and $400 per 1000 board feet.
Now, a few times in the past 25 years, it’s gone up very briefly above $400 a board feet, but then went back down below that amount. And at least one time it went down to below $200.
So the price has been very consistent otherwise in trading between $200 and $400.
And then in 2018, it broke above that $400 range and went up to $600. But by the end of the year, it went back down under $400 and traded for the most part under $400 and dipped below $300, even when Coronavirus started in early 2020, just about a year ago.
And on March 1st in 2020, lumber bottomed out at $230, that’s again per 1000 board feet.
And then it spiked up and throughout the year, and in September of 2020, the year of Coronavirus, it spiked up to $900.
If you look at this chart, which I’ll post, it literally is a price that is off the charts. In the chart that I’m looking at, it has been grayed out on the very top because the chart wasn’t designed to see a spike in lumber that high and the price charts that I have available to me goes back 40 years.
And so the price was trading less than $300, in that $200 to $400 range.
40 Year Lumber Prices
It was lower than that in 15 years before the 25 year period that I’m talking about right now.
1 Year Lumber Price Chart
And so there hasn’t really been a need to have a chart for lumber much above $500, $600 or design the chart to $700. That would make sense, but it literally is off the charts in September of 2020, at $900.
And I predicted that lumber would not stay up that high and it did go down and it went down to $500 per 1,000 board feet by the end of the year, or by the end of September, I should say. But then went back up and stayed in the $600 to $700 range for the rest of the year.
Now in 2021, lumber spiked up again to $900 per 1,000 board feet then went down to $700 and I was hoping it would continue to go down.
Lumber Prices Are Off the Charts!
But just this last week, it spiked up to an historical high and that’s high spike is $989, which is incredibly high and again, off the charts.
And so the price of lumber is historically high and is affecting everyone in the real estate industry. So it’s affecting you as a homeowner. It’s affecting you as a potential home buyer. If you are first-time buyer, home prices are up, especially for new construction. If you were looking at new homes a year or a year and a half ago, you might be shocked if you go back into the market. Now that the same homes have such a higher price now, and that’s because of the price of lumber. And if you’ve looked into doing any remodeling in your home on home improvement projects, you’ve gotten prices from con contractors that may seem very, very high to you.
How Lumber Prices Affect You
And that’s in large part because of the price of lumber, especially if you building a deck or adding square footage of living space to your house, uh, all materials are high, but the price of lumber is super high right now.
And I, again, I thought it was going to go down, but demand is so high for new home construction and home remodeling projects. And obviously the inventory has not caught up. The market has not caught up and recovered from Coronavirus shutdowns.
I don’t have any specific information, but I would not be surprised that the timber industry has not totally come back to what it was before coronavirus because of maybe laws in the jurisdictions where the timber is harvested. And with people, workers getting sick from Coronavirus and social distancing, and all these things are affecting the rate at which lumber could be harvested and produced and get ready for the market.
Lumber Prices Affect Home Prices
And so the price of lumber is high and will remain high, obviously for some time. Now it could go down very sharply, but I’m thinking it’s going to stay trading at this point between $700 and $1,000. I would hope no more than that, but who knows?
So if you are in the market for any home improvements in your house, say you wanted to put up a privacy fence, that lumber is going to be very expensive now. And if you wanted to put on a deck or finish out a carport into a room or a garage into a room or actually add more structure to your house, the cost of doing so is going to be very, very high.
New Home Construction Prices
And if you are in the home in the market for a new home that is being constructed, or yet to be constructed, you may run into some challenges and anomalies that builders don’t normally put into their contract.
And I’m hearing about builders that want to have an out in the contract just in case they go under contract and the next day a lumber spikes up to some ridiculous amount.
So you’re going to run into some issues. Now, some of the bigger home builders, they purchase lumber and they have their own inventory to a certain extent, and maybe can weather the storm of the spikes going up. So you might be able to lock into a contract now with a builder that has some lumber inventory and get a price that you’re happy with. But in general, you are going to be paying top dollar right now for any new home that is being built and new home that you would put under contract to be built. And the reason is because of the price of everything, the tightness in the labor market and skilled labor and the price of lumber in particular, which affects home construction, obviously.
Housing Market Prices and Inventory
So that’s what I wanted to bring to you today. The price of lumber, it’s not something that I know most of us, the average person thinking about real estate, buying homes and selling homes, thinks about, but this is such an important issue that’s affecting you right now.
And if you’ve scratched your head, wondering why prices are so high on homes and any older homes that are refurbished and put on the market remodeled and made like new, the expense of doing that is very high.
So homes, older homes that are being fixed up right now, there’s a lot of money going into those home renovation projects. When those homes hit the market, the prices will be higher than what you might expect. So another caveat to this whole situation is that inventory is very low. If you are in the market of buying a home you know it’s very hard to find much available on the market, and this is pretty much true throughout the country.
It’s certainly true in the North Metro Atlanta area where I’m working. Inventory is at historical lows. New home builders are taking advantage of the opportunity to fill the void in the lack of inventory to make homes available. But again, those prices are high and we will see where this goes, where the market goes.
Home Equity and Home Values Remain High
But the market is very strong in terms of home values. People have a tremendous amount of equity in their homes. And so this is not a housing crisis or a home price crisis.
It’s the opposite.
Home prices are high and they’re remaining high. They’re expected to remain high.
I don’t think they will appreciate in value as much over the next 12 months as they have in the previous 12 months. I could be wrong about that, but I think more inventory will hit the market.
And the rate of home price appreciation will slow down, but home prices will continue to appreciate.
And then as home mortgages, the home mortgage interest rates remain low, it’s a, still a great time to buy because you’re getting access to capital to purchase a home, and you can make a home purchase and keep your monthly payment low relative to the amount of money you’re borrowing, because the interest rate is so low,
But keep in mind if you are a new home construction buyer, you’re paying a premium right now.
And if you have an existing home and you’re going to fix it up to get it ready for the market, it may cost you more than you than you previously thought because of the price of lumber.
Contact The Agent On Duty
So that’s all I wanted to bring to you today. Thank you for listening.
If you have any questions, feel free to leave a note in the show notes when you go to innovative properties.com/podcast.
You can also call my podcast hotline at (678) 288-4181 and ask any real estate related question.
Leave your voicemail, and I’ll answer your question in a future podcast.
Thank you for joining me today.
I am John Marian and I am the Agent On Duty.
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