When the Market Gives You Splinters: Why Falling Lumber Prices Might Not Mean What You Think

The Expert Podcast

Current Market Overview:

• Lumber prices have dropped below $1,000 per thousand board feet after reaching highs of $1,400-$1,700 in 2021
• Current pricing is similar to levels seen at the end of 2021 and early 2022
• Price volatility remains extremely high, making predictions difficult for contractors and builders

Why Lower Prices Don't Equal Immediate Relief:

• A typical $40,000 lumber package might drop to $30,000, but increased labor costs of $7,000-$8,000 offset much of the savings
• Contractors must price jobs based on worst-case scenarios due to unpredictable timing between quotes and actual purchases
• Supply chain bottlenecks continue to create artificial demand reduction

Supply Chain Challenges:

• Lumber yards and supply houses facing inventory shortages on specific items (pressure-treated lumber, certain lengths)
• Major retailers showing limited availability and higher prices
• Incomplete orders preventing new purchases, affecting overall demand

Labor Market Impact:

• Construction workforce availability remains constrained despite economic recovery
• Seasonal uptick in spring construction competing for limited skilled workers
• Self-fulfilling prophecy as more projects spread available labor thinner

Permitting Bottlenecks:

• Government offices experiencing severe staffing shortages
• Permit approval times extended from 1-3 weeks to 2-3 months in many jurisdictions
• Extended timelines force contractors to plan for worst-case lumber pricing scenarios

Storage Strategy Considerations:

• Some builders considering purchasing lumber at current lower prices for future projects
• Storage risks include theft, weather damage, and insurance coverage gaps
• Insurance policies may have distance restrictions (50-100 feet from job site)
• Price arbitrage potential exists but comes with significant logistical challenges

Market Outlook:

• Lumber price drop appears counter to overall inflationary trends in gas, food, vehicles, and housing
• Reduced building volume could force producers to raise prices to cover fixed expenses
• High volatility makes traditional 3-month price predictions nearly impossible

Opportunities for Different Project Types:

• DIY and small projects may benefit most from current pricing if permits aren't required
• Large commercial projects see minimal impact due to labor costs and timing constraints
• Home additions and upgrades remain attractive investments given strong real estate market

Key Takeaway:

• While lumber prices have dropped, the combination of supply chain issues, labor shortages, permitting delays, and market volatility means the savings may not translate to significantly lower construction costs for most projects.