Why are prices for lumber so high in 2022?
The price of lumber constantly hit record highs in the past two years due to increased demand for real estate, supply chain disruptions, and limited production capacity. While prices quickly dropped after the massive lumber bubble in 2021, they started increasing once again in the latter part of the year.
Unfortunately, the trend persists through 2022, with lumber prices doubling from November 2021 to January 2022. As a result, the price per thousand board feet once again exceeded the $1,000 threshold, alarming many consumers and home builders.
So, why is lumber so expensive? While the current situation seems to be a repeat of last year, the conditions driving high prices are different this time around. Check them out below to get a better picture of the lumber industry and why prices continue to stay high.
Increase in Tariffs
One of the biggest factors driving high lumber prices is the increase in tariffs on Canadian softwood lumber producers. In November 2021, the government raised tariffs to 17.99%, more than double the previous 8.99%, to encourage buying local lumber.
Unfortunately, the US relies heavily on Canada to supply its lumber. Currently, the country’s softwood lumber production is only enough to meet 70% of the demand, while the remaining comes from Canada. However, with the massive tariff adjustment, supply will likely be constrained, resulting in an increase in lumber prices.
Environmental Issues in Canada
Different parts of Canada have been hit by storms in late 2021, persisting through early 2022. One of the most prominent issues would be heavy rain and flooding in British Columbia, which affected rail and highway routes. The US imports a big part of its lumber from Canada, so the blocked transportation routes resulted in major shipment delays.
Another major environmental concern driving lumber prices up is mountain pine beetles eating away at pine trees. This problem has been kept at bay by Canada’s long and hard winters that have helped kill the beetle’s eggs and larvae in trees. However, beetles have been aggressively destroying trees and forests with rising temperatures and low precipitation.
Finally, wildfires continue to rage in Canada and US lumber regions like Oregon. In July 2021, Canfor Corporation—one of North America’s largest lumber suppliers—had to cut production by 115 million board feet in its Canadian lumber mills due to extreme wildfires. These affected their capabilities to transport lumber to market, which led to the decision to reduce production capacity.
Overall, these environmental concerns have compounded into supply shortages for lumber and other building materials, ultimately resulting in higher prices.
Continuous Demand for Housing
Another reason why lumber is so expensive this year is sustained demand for housing. Contrary to some assumptions, the real estate market remains strong as more millennials reach the home-buying age and start taking out mortgages.
Unfortunately, with inventory continuously going down and few new listings posted, the current housing supply cannot meet demand. According to Altos Research, the total inventory for single-family homes in the US reached a new record-low of 283,913 in January 2022. It is a huge drop from the 737,718 in January 2021.
Given this context, prices for homes and lumber will likely stay high in the meantime. Based on estimates from the National Association of Home Builders, the price jump for newly-built homes is about $18,600. Additionally, since the real estate market is a huge seller’s market now, you can expect major bidding wars and competition to ensure among buyers.
Future Outlook on Lumber Prices
As highlighted in the list above, the main reasons why lumber is so expensive in 2022 have to do with major supply shortages. The price hikes from the past two years were mainly caused by supply chain disruptions and production constraints due to the pandemic. However, this year is more about external factors that have led to shortages, making the situation trickier.
For example, increased wildfires and mountain pine beetle issues are all causing trees to get destroyed, but it takes years for trees to grow back. At the same time, demand for lumber continues to climb as the housing market stays strong.
Overall, the massive demand-supply imbalance is causing prices to be so expensive this year. The outlook is that lumber prices will not be dropping anytime soon. However, some experts believe that the market may start calming by the second quarter as interest and mortgage rates increase.
That said, even if prices decrease by a bit, they will not immediately return to pre-pandemic levels. The gap between housing demand and supply remains huge, so lumber prices will still increase as builders and homeowners undertake construction projects.
Get High-Quality Lumber for Your Projects Today
Now that you know why lumber is so expensive, you should stock up on the wood you need before prices get even higher. Alternatively, you can also pulse the market to get a feel and decide if you want to wait it out for a potential drop. Regardless, sourcing high-quality lumber supplies should be at the top of your mind to ensure high-quality outputs in your projects.
If you have something planned for your home anytime soon, Peninsular Lumber can help you out. We surely have everything you need with the largest selection of lumber and building materials in Tampa Bay. Contact our lumber company in Tampa Bay today at 813-875-8805 for more information about our lumber company in Tampa and our products.