Lumber Prices Rise Again

Lumber prices are making an unusual late-season climb, thanks to builder-friendly autumn weather and suppliers stocking up for what they expect to be another big year for home construction.

Lumber futures have shot up 24% so far in November, closing Thursday at $616.90 per thousand board feet. That’s a lot lower than the record $1,000 hit this summer during America’s pandemic-induced lumber binge. But it is nearly 90% more than the typical price for boards delivered in January.
“By any historical standards, this is just incredibly strong pricing,” said Devin Stockfish, chief executive of Weyerhaeuser Co. , which owns mills and is the country’s largest private timberland owner.

Wood inventories are thin throughout the lumber supply chain, while demand from builders and home remodelers remains strong, Mr. Stockfish said during an online real-estate investing conference this week.
”We’re going to see some seasonal slowdown,” he said, “but our expectation is that the builders are going to continue to build as much as possible until winter weather really starts restricting building activity.”

Autumn has proven especially accommodative for builders in the South, where demand from job sites—and from restocking lumber dealers and distributors—has buoyed prices for southern yellow pine, according to pricing service Random Lengths.

Single-family housing starts, a measure of home construction, climbed in October to its highest level since 2007, rising 6.4% over September to a seasonally adjusted annual rate of 1.179 million, the U.S. Census Bureau said this week.
The boom in single-family homes has offset a decline in apartment construction and been fueled by a flight to the suburbs, where home offices and outdoor space have become work-from-home must-haves. Historically low mortgage rates are attracting buyers, while investors are building thousands of suburban houses expressly to rent.

The National Association of Home Builders said this week that builder confidence hit its highest level since its monthly surveys began in 1985. The National Association of Home Builders/Wells Fargo Housing Market Index combines current sales, traffic from prospective buyers and sentiment toward the next six months. The November index hit 90 on a scale of 0 to 100, in which 50 represents neutral sentiment. A year ago it was 72.
“In 32 years, the best market I have ever seen,” D.R. Horton Inc. CEO David Auld told investors last week. “And it does feel sustainable, unlike what was a false demand in the last big upcycle.”

D.R. Horton, the country’s most prolific builder, said it sold 78,458 houses during the fiscal year that ended Sept. 30, a 39% increase over the preceding year. It expects to close deals on about 20% more houses in its current fiscal year than the one that just ended. The Arlington, Texas, company said the summer’s record lumber prices will bite into margins in the present quarter, during which it expects to sell smaller homes, on average, but at higher prices.

Sales of existing homes are also good for lumber demand, and they haven’t been stronger since 2006, the National Association of Realtors said Thursday. Many sellers make repairs before they list homes, while buyers often move in with renovations in mind.
The repair and remodel market-—which exploded this year when Americans were stuck at home to slow the spread of Covid-19—typically accounts for about 40% of lumber consumption.

The country’s biggest home-improvement retailers, Home Depot Inc. and Lowe’s Cos., this week reported comparable sales for their recently ended quarters that were up 24% and 30%, respectively. Both said lumber sales were a big boost and that overall sales to do-it-yourself customers grew faster than those to professionals.

Lowe’s CEO Marvin Ellison said Wednesday the retailer was riding a wave created by Americans’ rush to redesign their homes to better suit their pandemic needs.

“They took steps to shift their home to serve three primary purposes: a home school, a home office, and their primary location for recreation and entertainment,” he said.