By: The Working Forest Staff
MADISON’S REPORT — Unrelenting and extremely motivated demand is the reason behind this incredibly sharp rise.
New-home purchases account for about 10% of the market and are calculated when contracts are signed. They are considered a timely barometer of the current real estate market.
Softwood lumber prices continued to skyrocket, to US$1,210 mfbm on benchmark commodity WSPF KD 2×4 #2&Btr, up +$894, or +283% in April 2021, compared to one-year-ago when it was US$316 mfbm. A price increase of almost triple what the price was in April 2020 is mind-boggling.
The number of new homes for sale in March dropped slightly, to 307,000, compared to 312,000 in February. However, the inventory of new homes-for-sale dropped significantly, at the current sales pace in March it would take 3.6 months to clear the supply of houses on the market, down from 4.6 months in February.
After reaching a high last month, the median sales price of new houses sold in March 2021 dropped to US$330,800, from $349,000 in February 2021.
Madison’s is running out of adjectives to describe these non-stop increasing lumber prices. Customers who regularly make large-volume lumber purchases remain underbought and can no longer delay booking orders, as they wait in hopes that prices will go down. Supply continues to be incredibly scarce. US housing starts data for March 2021 has been released; activity is up significantly compared to one year ago. Indeed, permits for total housing starts are up +30% while permits for single-family starts are up +36%. This indicates there is significant upside yet to demand as home construction activity is continuing to increase.
Demand for housing is being driven by Americans seeking more space for home offices and schooling as the year-long coronavirus pandemic drags on. Builder backlogs of projects awaiting construction remain elevated and indicate residential building will stay firm in coming months and contribute to economic growth.
Continuing to surpass any level previously considered normal, in the week ending April 16, 2021, the wholesaler price of benchmark softwood lumber commodity item Western S-P-F KD 2×4 #2&Btr was US$1,210 mfbm. This is up by +$80, or +7%, from the previous week.
That week’s price is up by +$170, or +16%, from one month ago when it was $1,040.
Compared to the price one-year-ago, when it was US$316 mfbm, for the week ending April 16, 2021, that price is up by +$894, or +283%. Compared to two years’ ago when it was $336, that week’s price is up by +$874, or +260%.
STAY AHEAD of US home sales data by getting access to softwood lumber prices. Released every Friday for that week, since 1952 Madison’s Lumber Prices are used by the forest products industry as a price guide for North American construction framing dimension softwood lumber. These are, of course, the inputs into US and Canadian home building materials.
Shrewd investors know that construction framing softwood lumber prices are a good leading indicator for US housing activity, including home building and home sales. Don’t miss out, get lumber price data updates directly to your desktop every Friday morning: https://madisonsreport.com/subscribe.