Lumber Prices are Falling

 

Welcome back to DIY with Dave. I took a trip to my local big box hardware store this week, and I saw a few very interesting things and some signals, the lumber prices are changing. So stick around and I’ll tell you all about it.

 

So lumber futures have been falling for the past month. They were at a peak of $1,670. mid-May and they fell to just under $800 this past week. So that is great news. But what does that mean for the prices that we actually pay?

 

Supply & Demand

 

In my very first video on lumber prices, I talked about supply and demand using these demand curves. It’s a great way to illustrate how supply and demand work together to influence price. So applying those concepts to the lumber situation that we’ve seen over the past year, we first saw a shortage of lumber due to shutdowns and logistical challenges. 

 

Then there was increased demand for new home construction and new home improvements. That increased the demand and the decrease in supply lead to high prices. What has happened since is lumber companies have been working overtime to pump out as much supply as possible in order to take advantage of those high prices and make a fortune. 

 

Well, it’s worked and the supply of lumber has increased so much that we’re seeing lumberyards and stores filled to the rafters with overpriced lumber. Now I’ve even seen some lumber spoil because it was not moved quickly enough. Now that’s on the supply side. 

 

 

The Timeline of the Inflation and Normalcy

 

In addition to that, I’ve seen 1000s of comments on my videos of people who are putting off all their projects until prices get back to normal. So that definitely has an impact to demand as well.

 

So let me show you something that I saw on my most recent trip to the hardware store. This right here is a display of hundreds of bottles of alcohol hand sanitizer. Now I’m sure you all remember when this stuff was just flying off the shelves right in one week alone hand sanitizer sales increasing more than 300% some big retailers like Target Kroger and stop and shop now rationing how much each shopper can buy. 

 

So prices for hand sanitizer went through the roof because there wasn’t enough supply to meet that demand. All sorts of people started making hand sanitizer to take advantage of the high prices. While this increased supply prices still stayed high because the demand was still high. 

 

Over time that demand went down as people had all the hand sanitizer that they needed. While I don’t think that lumber will be as dramatic as the hand sanitizer example the price will come down slowly over the course of time. 

 

It may take even a year or two, but as it does, some people will decide that it’s time to pull the trigger on their projects and start buying lumber again, supply and demand will equalize and prices will stabilize. 

 

With lumber futures coming down and the supply of lumber continuing to be really high. Why are lumber prices coming down more quickly? Well, that’s because there’s a lot of high-priced lumber still on the shelves. Retailers paid high prices for that lumber when they bought it, and they don’t want to sell it for a loss if they can help it. 

 

As that higher-priced lumber works its way through the Marketplace, we should see prices change. 

 

 

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