Lumber party: Prices soar on booming home sales, beetles and bottlenecks in sawmills

The physical market is also red hot, with the price of the preferred product for wooden framing — 2×4 lengths of Western Spruce-pine-fir — rising 30 per cent since the turn of the year to US$1,205, according to lumber pricing company Fastmarkets Random Lengths. That is almost US$900 above the average price since 2005.

Lumber is wood that has been processed into beams and planks — a key building material in the U.S., where around 90 per cent of newly built homes are wood framed. The National Association of Homebuilders estimates the increase in lumber prices since last spring has added more than US$24,000 to the cost of building an average new single family home, which now stands between US$300,000 and US$330,000.

Jannke said the seeds of the lumber rally were sown last year. As the pandemic spread across North America, many sawmills reduced production in expectation of plunging demand. Dealers also ordered less material and ran down their inventories. The NAHB expected a 4 per cent gain in single family home construction in 2020. Instead, it rose by 12 per cent, bringing the total to a million for the first time since the financial crisis.

“The sawmill capacity doesn’t exist to produce enough lumber for what is being produced today but that probably doesn’t warrant prices at US$1,200,” said Jannke. “Had the inventory been in the system we would probably have seen prices peaking out at around US$700 or US$800.”Article contentPhoto by Ben Nelms/Bloomberg files

I’m seeing 2x4’s at $8. That’s WAY more than a 30% increase.

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