Lumber Price Drops Fueling Multifamily Building Boom
“Our renewed interest is now turning into actual orders and people placing business here for the second half of this year.”
A drop in lumber prices has invigorated demand for commercial building projects, especially for multifamily product, Sherwood Lumber chief operating officer Kyle Little told CNBC last week.
A drastic runup in lumber prices earlier this year created a challenging environment for builders, but the industry appears to be well on the path to recovery from the sell-offs of the first half of 2020. Little told CNBC that the current lumber prices make “absolute sense” when viewed against that backdrop.
The price of lumber hit $480.40 per thousand board feet the previous week, a low watermark since July 2020, and CNBC reports that lumber prices should hit their 13th consecutive week of loss this week.
“Over the last three weeks we’ve seen renewed interest,” Little said on CNBC’s The Exchange. “Our renewed interest is now turning into actual orders and people placing business here for the second half of this year, most notably in the commercial segment and into the multifamily unit segment.”
While the drop in prices is indisputably good news, there is still some pricing uncertainty that concerns observers.
Lumber futures declined by more than 40% in June, but NASDAQ futures prices for the commodity were more than $530 per thousand board foot.
“Futures represents the price of a railcar that is shipping sometime from September 15th to September 30th,” Mike Wisnefski, CEO of online commodities marketplace MaterialsXchange, told GlobeSt in an earlier interview. “From years of experience, it is difficult to say why futures prices are where they are,” Wisnefski continues. “So many different parties are involved and each one has its own unique set of circumstances that they are dealing with.”
But these are prices to wholesalers. While the cost to builders has been “slowly coming down,” as Wisnefski points out, “there is a lot of high-priced inventory in the supply chain right now.” That means builders might still be paying more than they’d like.
Now, Little says, the market is seeking equilibrium.
“What we’re finding is the support level that follows the bottom end of that continual trend pre-Covid is very, very bullish,” Little told CNBC. “It’s also one that would be making a lot of us in the lumber world feel much more comfortable going and rebuilding inventory here for the second half of this year with the projected demand that we are now seeing.”