Lumber price spikes during the past year reportedly have added $36,000 to the price of a typical single-family home and slowed and even cancelled some construction, according to www.forconstructionpros.com. Lumber prices recently have begun to fall, though prices remain higher than usual.
However, the decline in prices still could be a positive sign for the economy regarding inflation.
According to The New York Times, “runaway inflation” as seen in the late 1960s and 1970s is psychological as much as economic; people convinced there is no end to price increases rush to buy immediately, no matter the price. By contrast, the lumber market’s behavior in June is viewed as a sign of consumer sanity.
“We don’t have that kind of buying frenzy that creates sustained inflation,” said Kristina Hooper, chief global market strategist at investment management firm Invesco. “To me, this is very, very different than the 1970s.”
Federal Reserve officials agree, saying they have argued any price increase would be temporary.
“Our expectation is that these high inflation readings that we’re seeing now will start to abate,” said Federal Reserve Chair Jerome H. Powell. “That’s what we think. And it’ll be like the lumber experience.”
However, builders still are experiencing the struggle; after a few weeks of cost correction, lumber prices still are two to three times the typical price.
Lumber futures are down more than 45% from their peak, below $900 per thousand board feet for the first time in months. But between 2009 and 2019, futures averaged less than $400 per thousand board feet.
