Lumber prices are rising again—fast

For the fifth consecutive week, lumber prices are up.

On Friday, the price per thousand board feet climbed another 5% to $494. Since bottoming out at $389 per thousand board feet on Aug. 27, the “cash” market price of lumber has swung back up 27%, according to data provided by Fastmarkets’ Random Lengths to Fortune.

While percentage-wise prices are rising fast again, they’re still far below the levels reached this spring. At the height of the lumber bubble, prices topped out at a record $1,515 price per thousand board feet in May. But this recent bounce does represent a clear trajectory change for lumber, which spent much of the summer in a free fall after homebuilders and do-it-yourselfers alike balked at exorbitant prices.

Why are prices rising again?

A lot of it is due to pent-up demand—which got priced out this spring—returning to buy wood now that prices are reasonable again.

“Buyers need to replenish after weeks on the sidelines,” Shawn Church, editor at Fastmarkets’ Random Lengths, which tracks the wood products industry, told Fortune.

That includes homebuilders. Indeed, housing starts in August climbed 4% to 1.6 million. That’s not far off from the 14-year high of 1.7 million reached in March—a level that caused stress on sawmills and was a key contributor to the lumber run.

Rebounding demand isn’t coming from homebuilders alone: When lumber prices hit their bottom in August, many DIYers rushed back to lumberyards. (Back in the summer, Fortune noted this might happen.) And it might get even busier: A recent poll by Expertise.com finds 65% of U.S. adults who delayed a home project this year because of high lumber prices are planning to restart their projects now that costs are back down.

There’s also a shift occurring on the supply side. The Pacific Northwest and British Columbia—the epicenter of North American lumber—were hard hit by wildfires this summer. That has led to some sawmills temporarily shutting down.

“Mill curtailments, particularly in British Columbia, were a major factor in the trend reversal,” Church says.

Going forward, the big question is, will prices continue to rise? Traders seem to think so. As of Friday, the futures price for thousand board feet in January 2022 is $664. That’s $170, or 34%, above the current “cash” market price.

In the years prior to the pandemic, lumber prices usually fluctuated in the range of $350 to $500. Last month we were at the lower end of the spectrum ($389). Now we’re at the high end ($494). If the $664 futures price materializes in the cash market, we’d again be back to elevated lumber prices.

While industry insiders tell Fortune they expect prices to continue to rise this fall, it’s very unlikely we’d see another lumber run like the one this spring. The dropoff in demand this summer, which got sidelined by record prices, gave the lumber supply chain breathing room to catch up. That means the supply shocks caused by the 2020 lockdowns (a.k.a. sawmills temporarily shutting down) are finally in the rearview mirror.