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May
23

If a tree falls in the forest, does it make a sound?  Yes.  Yes, it does.  And as of late, the sound it has been making has been "cha-ching."  

Lumber prices have been soaring higher than home prices this year.  The inflation in lumber prices has not only caused obstacles for new construction but has also produced some of the funniest memes of the year on social media.  But before you go and cash in your cryptocurrency for 2x4's as a viable retirement plan, you may want to reconsider as the prices are starting to fall, causing a sigh of relief from builders everywhere.

No one has been immune to the fallout of the pandemic, including home builders, whose sentiment sank to the lowest levels since August of 2020 as lumber prices reached record highs over the last 5 months, according to a newly released report from the National Association of Home Builders.   The availability, or lack thereof, of softwood lumber and other building materials, could not have happened at the worst time, as buyer demand for building of new homes started to surge.  This surge was unfortunately met with two responses: either higher prices from the builders or a decline to take new orders due to the pricing challenges.  

But with a swift swing of an ax, wood prices are starting to come down, and they are falling fast!  In a recent report from The Wall Street Journal, futures for July delivery of lumber were $1,009.90 per thousand board feet or a 41% drop from the record of $1,711.20 reached in early May.  This is a great sign, not only for construction companies but also for individuals looking to start or hoping to finish their new home construction that may have halted.  This also means that the market for lumber will become more competitive as builders who may have been hoarding lumber, probably the same people who were stockpiling gasoline, will have to unload their inventory.  

While $1,000 is not going to be the "new normal" for lumber, the amount of new construction over the next few years is going to require a significant amount of wood.  We are not going to be able to escape the inflation that is starting to set in across the board, but the falling prices of timber are a good sign for the housing market and builders everywhere. 

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