The sky-high price of lumber fell a bit closer to earth this week from its recent stratospheric highs, offering some cost relief to homebuilders, but no more clarity about the future.
Lumber prices began the week by reaching their lowest point of the year, hitting $780 per thousand board feet on Monday, the business publication Insider reports.
The 6 percent drop in a single day continued the dizzying roller coaster of ups and downs for construction material prices that have plagued homebuilders and new-home buyers since the beginning of the pandemic.
Lumber prices were down 30 percent from the start of the year, and 13 percent from last week, Insider reports.
The downward pressure in lumber prices has coincided with reports of declining demand for newly built homes as prices have continued to rise and mortgage rates have snapped back from their historic lows of last year.
As part of John Burns Real Estate Consulting’s monthly survey, homebuilders said they have observed less interest from entry-level buyers and a more wary class of investors, the firm’s Director of Research Rick Palacios Jr. wrote on Twitter.
One builder from the California areas of Riverside and San Bernardino reported “an immediate change of buyer behavior” as soon as mortgage rates exceeded 5 percent.
“Cancellations are starting to creep up due to loan declines and job losses,” the builder told the John Burns team. “Waiting lists are certainly smaller.”
More buyers also canceled in neighboring Nevada, a Reno builder reported. This company’s buyer cancellation rate nearly tripled to 16 percent in April from 6 percent the month before.
“We attribute this to buyers that did not lock interest rates early in purchase process,” the Reno builder reported. “Also seeing many buyers put buying decision on hold.”
In Tampa, another homebuilder said the last month marked a significant change in buyer behavior.
“Florida was on fire and pricing has really come to a high point, and people are not willing to pay the prices anymore,” the builder said, according to Palacios.
While reduced demand may have contributed to the recent fall in lumber prices, they remain far above pre-pandemic levels as the industry continues to grapple with massive supply-chain issues.
Lumber remains approximately twice as expensive as it was prior to 2020, according to the U.S. Bureau of Labor Statistics. Beyond lumber alone, the prices of materials used in construction were up 33 percent in April from their levels before the pandemic.