Last fall, lumber prices in the U.S. were soaring along with a surge in new homes.
With the nation’s housing market now in a slump, prices have plummeted. According to a report from Markets Insider, prices fell to their lowest level since June 2020 this Monday.
Per the most recent report from the National Association of Realtors, pending home sales slid for the fifth consecutive month in October and were down nearly 5% compared to the previous month.
“October was a difficult month for home buyers as they faced 20-year-high mortgage rates,” said NAR Chief Economist Lawrence Yun. “The West region, in particular, suffered from the combination of high interest rates and expensive home prices. Only the Midwest squeaked out a gain.”
At the low point Monday, lumber prices were at $382.80 per thousand board feet. This represented a 9% tumble in three days and was “below the $400 level that has served as key resistance since 2013,” according to Markets Insider.
Lumber jumped up 5% Tuesday to $411 per thousand board feet, but prices remained down 64% year-to-date. Even before the pandemic began in early 2020, lumber prices were at record levels and Americans were embarking on DIY home projects.
A recent spike in mortgage rates “decreased the affordability for new home buyers, which led to a significant slowdown in existing home sales,” said Markets Insider. DIY projects also slowed during the lockdown stages of the pandemic.
A November report from the National Association of Homebuilders found that homebuilder confidence dropped for the 11th month in a row to the lowest level in a decade.
“Any reversal in this year’s sharp uptick in interest rates could have a strong effect in shoring up confidence in the U.S. housing market,” said Markets Insider.
This year, the Federal Reserve Bank has increased interest rates several times in an effort to combat inflation. Freddie Mac said last week that “mortgage rates continued to drop this week as optimism grows around the prospect that the Federal Reserve will slow its pace of rate hikes.”