The price of lumber has skyrocketed to a record high and four times its usual price at this time of year, causing a spike in homebuilding costs, The Wall Street Journal reported.
Lumber futures, or the market price for wood, reached a record $1,500.50 per thousand board feet on Friday, according to The Wall Street Journal. A board foot, the unit used to measure lumber, equals one square foot of wood with one inch of thickness.
“Absent a significant increase in mortgage rates or a Covid resurgence, it is hard to imagine what could cause lumber demand to drop and prices to moderate in the foreseeable future,” Eric Cremers, the CEO of major lumber producer PotlatchDeltic, told the WSJ.
The spike in lumber prices is mainly because of the coronavirus pandemic, according to Fortune. The economic downturn last year led to a significant decrease in lumber production.
As the economy has rebounded and lumber demand has quickly increased, production hasn’t been able to keep up, Fortune reported. Lumber production only reached its pre-pandemic level in December, the Federal Reserve said, according to the WSJ.
Home prices and the cost of building new homes, meanwhile, have been driven up by the increased prices, Cremers noted during a recent call with investors, the WSJ reported. U.S. home prices increased 10.4% earlier this year, marking the largest increase in 15 years.
“The prices appear to be passing on,” Don Kayne, CEO of Canadian lumber producer Canfor, recently said, according to the WSJ. “So far we haven’t seen the resistance that you would expect.”
Demand for lumber isn’t expected to slow for several months, according to Fortune. Homebuilding and renovation season typically begins in the springtime.