What has caused the lumber prices to lower?
A lot of the lower pricing is due to the housing market cooling off and going back to normal.
With cooler tempatures comes a cooler housing market and with the slower housing market, lumber prices continue to go down. Since the peak in May 2021, prices for lumber have been going down.
As of August, 2022, lumber prices were at a new 2022 low falling around 5% to $495 per thousand board feet. This is a great break from the record high of $1,733 per thousand board feet. The weakness in the housing market due to the higher interest rates has also weakened the demand for lumber.
“For the last couple of years it’s just been an unbelievable market where all the builders are taking orders, everybody is having phenomenal success, everybody is having phenomenal margins,” LGI Homes CEO Eric Lipar said in the company’s earnings conference call on Tuesday.
Lipar said that they will be flattening out their home pricing in the near future. They will sell the same floor plans but for less money. Good news for home buyers. There will finally be a break in the market away from the rising home prices and surging mortgage rates. Both the Fed and consumers are hoping that the inflation will come to a halt.
In a nutshell, the housing market is slowing getting back to normal. This means that lumber pries will also go back to normal in the trading range of $200-$600 per thousand board feet.
“A 33%, adjusted gross margin, we are very unlikely never to post that, again, in our history. It’s such an outlier in gross margin. And we are just going back to normal,” Lipar said.
