Lumber Futures Fall to Nine-Month Low as Housing Market Dries Up

Chicago lumber futures (LB1:COM) fell as low as $568.40 per thousand cardboard feet to the lowest level since September, as higher interest rates and soaring home prices begin to take a toll on home sales.

The lumber futures are apparently extending this year's plunge to ~50% and two-thirds below the peak of $1,733 per $1,000 board feet from about a year ago. The commodity’s collapse is a stark reversal from all-time highs set in 2021 during a pandemic-fueled homebuilding boom.

U.S. home prices are up 42% since the start of the pandemic, which coupled with a rate hike is making housing unaffordable. According to the most recent joint report from the U.S. Department of Housing and Urban Development and the US Census Bureau published on May 24, the U.S. new home sales fell by 16.6% in April from March and were down 26.9% from a year ago. It was the fourth consecutive month of declines, with sales falling to the lowest level since the early days of the pandemic in April 2020. Only 591,000 homes were sold last month, down from a revised 709,000 in March.

Lumber buyers have slowed orders and wood is piling up at mills, which are weighing on prices. But barring a recession, we don’t expect lumber prices to fall to pre-Covid levels below $500 per 1,000 board feet.