Visualizing the Recent Explosion in Lumber Prices


This post is by Marcus Lu from Visual Capitalist


Lumber Prices Explosion

Visualizing the Recent Explosion in Lumber Prices

Lumber is an important commodity used in construction, and refers to wood that has been processed into beams or planks.

Fluctuations in its price, which is typically quoted in USD/1,000 board feet (bd ft), can significantly affect the housing industry and in turn, influence the broader U.S. economy.

To understand the impact that lumber prices can have, we’ve visualized the number of homes that can be built with $50,000 worth of lumber, one year apart.

A Story of Supply and Demand

Before discussing the infographic above, it’s important to understand the market’s current environment.

In just one year, the price of lumber has increased 377%—reaching a record high of $1,635 per 1,000 bd ft. For context, lumber has historically fluctuated between $200 to $400.

To understand what’s driving lumber prices to new heights, let’s look at two economic elements: supply and demand.

Shortened Supply

U.S. lumber supplies came under pressure in April 2017, when the Trump administration raised tariffs on Canadian lumber. Since then, lumber imports have fallen and prices have experienced significant volatility.

After a brief stint above $600 in April 2018, lumber quickly tumbled down to sub $250 levels, causing a number of sawmills to shut down. The resulting decreases in production capacity (supply) were estimated to be around 3 billion board feet.

Once COVID-19 emerged, labor shortages cut production even further, making the lumber market incredibly sensitive to demand shocks. The U.S. government has since reduced its tariffs on (Read more...)