Lumber and log prices are both at 12-year July highs. Log prices are unprecedented for summer and may continue to climb as fire season kicks in. Other statistics remain strong or recovering.
All good news for forestry and wood products. Recent trends of lumber, logs, home construction, and housing markets, are compared.
Interpretation and Looking Ahead
The lumber price at $405 has broken $400 per thousand board feet (MBF) for only the second time in the last 12 years. The last time was during the latter part of true lumber market “spring” season — March and April, 2013.
So, why are lumber prices surging beyond already-healthy levels in midsummer? The answer is always supply and demand. This month the new boost in lumber prices is caused by extensive wildfires in British Columbia, accompanied by Canadian mill closures.
Logs also set a new 12-year record with this July’s report of $733 per MBF. (The July report covers June log prices.) In 2005, the second strongest July report in 12 years, the price only reached $679 per MBF. Only fall-winter prices, reported in November, December, January and February, have surpassed $733 in the last 12 years. This strong log price in the summer is truly unprecedented and results from the current log shortage, relative to log demand for lumber production in this highly concentrated and thoroughly modern mills region, the Southern Oregon and Willamette Valley. For all owners of forest land — private, state, and federal — this is a very good time to be conducting harvest and then reforesting.
These strong prices for logs and lumber are finally joined by an uptick in housing starts and building permits, reversing a three-month decline. Not since the beginning of 2017 have the building rates exceeded 1.2 million units per year, seasonally adjusted. The cost of lumber products in a home is small enough that it does not dampen home building. Interest rates do that, and they, too, are now very low, although the recent week price has ticked upward, compared to last month.
Portland’s unsold inventory of homes remains below two months and home prices continue to climb. This month, the national median home price (half of homes above the median, half of homes below) in the U.S. surpassed $200,000, according to Zillow. This is another milestone. The median price of a home surpassed $100,000 21 years ago, in May 1996.
The wildfire effect on lumber prices combines with the effect of log shortage on log prices to create very favorable conditions for log producers, which could continue. The summer fire season in the U.S. is just getting going in earnest.