North American umber prices fell for the fifth consecutive day on Friday, May 14.
After soaring more than 250% last month, lumber spot prices dropped to around $1,550 per thousand board feet last Friday, down from $1,686 the week before. Lumber futures also eased, dipping from a record high of $1,670.50 to around $1,400 per thousand board feet.
Consequentially, lumber stocks are experiencing a mild sell-off. Shares of West Fraser Timber were down approximately 9% this past week, while shares of Weyerhaeuser and Canfor were down 3% and 5%, respectively.
Data from the National Association of Home Builders revealed that the unprecedented rise in lumber prices has driven the average price of a new single-family home up by $35,872. This, combined with low supply, continue to further aggravate the housing affordability crisis nationwide.
“The construction industry is trying to catch up, but the issue we are facing today is decades in the making. There is only so much that builders can do quickly,” LendingHome CEO Michael Bourque said. “Eventually, the market will correct, and the timber industry, for example, will bring more sawmills back online, increase supply and lower the costs of those materials, but all these things take time.”
But rather than focusing on the challenges brought on by construction costs, Bourque sees a “huge opportunity” in improving the aged housing stock in the country.
“Today, two-thirds of the housing stock is more than 30 years old — and getting older. It’s worth something like $25 trillion today,” Bourque said. “Aged homes are move-in ready, generally more centrally located than where new construction builds are taking place today, and likely even cheaper. By working with a real estate investor to unlock this value, renovated homes become a much more attractive option to fill the supply gap.”