Do Lumber Prices Drive the Housing Market?

The price of lumber. It’s probably not the first thing to cross your mind when assessing the current housing prices. However, much like interest rates, it is an undeniable part of the process.

According to the U.S. Forest Service, the price of processed wood like softwood lumber and plywood nearly quadrupled during the first year of the Covid-19 pandemic. For example, wholesale prices of plywood went from $12.80 a sheet to a whopping $48.00 per sheet. “This drove the price of new construction home prices up, and often existing homes too since the price of renovation projects also skyrocketed,” says Michelle Korosy, Sales Associate at ERA Justin Realty.

“This was all due to supply chain issues,” says Jennifer Darby Metzger, Broker/Owner of ERA Justin Realty, “People were home, looking around, seeing more and more things they wanted to fix or change with home building projects. But, lumber mill workers were home too. Output dropped. Prices went up.”

“Some folks held off on necessary repairs,” adds Korosy “and by extension kept their houses off the market. The end result of that chain reaction: fewer houses on the market and higher prices on the ones that were. Fortunately, things are turning around.”

So where do things stand now?

Lumber prices started steadily dropping in the last year. Part of the reason: lumber mills are back in full operation and those quarantined DIYers who were buying up wood have returned to work.

“This is contributing to the normalizing of home prices from the height of the pandemic,” says Darby Metzger, “but it’s still a sellers’ market. It’s not a buyers’ market yet.”

The reason for that is mortgage interest rates. As the price of lumber started dropping due to increased labor but decreasing demand, mortgage rates started going up. They’re now more than twice they were a year ago.

“If the past few years have taught us anything, it’s that the housing market can be unpredictable,” says Korosy. “The cost of lumber is one variable, but it’s just one of many to consider.”

If you’re looking to buy or sell a home, Michelle Korosy or any of the experienced agents at ERA Justin Realty can help guide you through the process and all of its variables. Give us a call at (201) 939-7500.