The Lumber Bubble Has Burst! Here's What Happens Next...

lumber prices continue to fall back down and while prices in stores haven't completely normalized they're now at the lowest levels they've been in over a year in this video i'm going to explain what has happened and what's coming next [Music] a swinging pendulum is often used to demonstrate newton's third law of motion which states that for every action there is an equal and opposite reaction this is certainly true in the physical world but there's also a theory in the social sciences that trends in things like culture and politics and the economy also react to pivotal events and swing back and forth until that momentum eventually subsides and there's some sort of equilibrium or balance that's reached that's exactly what's happened in the lumber market over the past year prior to the pandemic in 2017 18 to 19 lumber prices were relatively stable they had their ups and downs but they averaged around 405 dollars per thousand board feet but the pandemic really pushed the pendulum and things really started to change in 2020. the beginning of 2020 started off like any other year but once lockdown started to take place and people feared an economic collapse homebuilders slowed down their work lumber mills slowed down production and lumber prices drifted all the way down to 260 dollars per thousand board feet at its lowest point that didn't last long however as demand from diyers and limited supplies drove prices up that continued all the way into 2021 with prices rising as high as 1 670 dollars per thousand board feet which is four times higher than the average of the three normal years before covid those high prices were initially caused by high demand and lack of supply but as mills worked overtime to try to churn out as much lumber as possible to take advantage of the high prices the problem became logistics and getting lumber from the mills to the lumber yards where they could be sold once those logistical issues were worked out there were just piles and piles of lumber being stored in lumber yards and big box stores but the prices still didn't come down until those retailers had worked through their high price inventories which brings us to today where we are now seeing some of the lowest prices in over a year so today lumber futures have dropped and are currently trading around five hundred dollars per thousand board fee now that is still much higher than the pre-covered average of 405 dollars but it is also much lower than that peak of 1 670 these changes in lumber futures are now being reflected in the real prices that we all pay for wood i've seen the cost of a 2x4 my local big box store come down significantly two by fours that were selling at eight dollars and twenty four cents in june are now selling for three dollars and fifty seven cents that's fantastic for anyone who's building a home taking on diy projects or doing woodworking osb that was selling for 65 dollars a sheet in june is now selling for 35 today that's still a lot higher than the normal price but it's almost cut in half from what it was just a month ago so that is all great news right but what does the future hold ultimately supply and demand are going to win out here and i happen to think that what we're seeing is the pendulum effect and we just happen to be on one of the downswings there are already a few lumber mills that have announced curtailments some of those due to wildfires and others due to low prices and that's going to put some pressure on supply also if natural disasters like hurricanes or wildfires hit populated areas you're going to see a run on supplies for rebuilding so on the demand side you've got a whole bunch of people a ton of people who've been putting off all of their building projects or their woodworking projects or whatever really waiting for those high prices to come down and they may be looking at the prices now and thinking you know now's the time to do it now it's time to pull the trigger and buy that lumber build that deck you know build that addition or whatever and that's going to create some demand and that's going to drive prices up the biggest factor of although on the demand side is still going to be new home construction in the u.s that is by far the biggest driver of lumber prices in the u.s and the housing market is strong most people think it's going to continue to be strong for the next few years and so that's going to put a lot of pressure on supplies it's going to increase that demand and that could drive prices up to be clear though i don't think that we're going to see lumber prices as high as they were earlier this year there's a lot of really unique factors that took place that kind of drove those prices up at the same time though i don't think that we're going to see prices as low as the precovet average i think the pendulum is going to swing back and eventually lose momentum until it kind of steadies out or until some other force comes along and gives it a real big push so what are prices doing in your area are you ready to get started on all those projects that you've been putting off leave me a comment and let me know please also give this video a thumbs up if you found it interesting and be sure to check out some of my other videos thanks for watching and we'll see in the next one [Music]

Channel: DIY with Dave

Views: 1,237,901

Rating: 4.9257932 out of 5

Keywords: high lumber prices, lumber prices, lumber prices 2021, lumber, wood prices 2021, when will lumber prices come down, why is wood so expensive, economics, markets, lumber mill, expensive, uneducated economists, when will wood be less expensive, economist, supply and demand, supply, demand, why is wood so costly, will wood prices come down, when will wood be cheaper, wood cost, are lumber prices expected to drop in 2021, lumber companies, will lumber prices come down in 2021

Id: 7wpf2WQBc1w

Length: 5min 31sec (331 seconds)

Published: Sun Aug 29 2021

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