Pandemic-spurred home renovation boom would be bigger if not for 208% spike in lumber price
Stuck at home, Americans had a lot of downtime to finally knock out some of their bigger home projects. Just how big is the do-it-yourself (DIY) boom? Well, Home Depot and Lowe’s stocks are up a respective 50% and 74% since the start of 2020. So pretty darn big.
In fact, 41% of U.S. homeowners say they’ve done a home project since the pandemic started, according to a Fortune-Researchscape International poll of 1,031 U.S. adults between April 2 to 5.* The poll has a margin of error of plus or minus 4 percentage points.
But that home renovation boom would be bigger if not for surging material costs. Among homeowners, 37% said they’ve delayed a home project during the pandemic. The top reasons being material cost (39%), lost income (35%), and material shortages (32%).
When it comes to surging costs and shortages, no material has caused DIYers more trouble than lumber. On Friday, the price of lumber per thousand board feet jumped to $1,104, according to Random Lengths. That’s an all-time high, and up 208% from a year ago.
“My family has been in lumber for over three generations, and seen many cycles of housing booms. We’ve seen ups and downs. But nothing compares to this boom in demand,” Michael Goodman, director of specialty products at Sherwood Lumber, told Fortune.
That DIY boom is playing a big role in the spike. At the same time sawmills were limiting production during the early months of the crisis, quarantining Americans set off a home renovation boom that required masses of lumber. That supply and demand mismatch was worsened by record low interest rates and a historically tight existing home inventory which caused buyers to rush to new construction. The backlog is so big that prices aren’t falling despite wood production hitting a 13-year high in February.
“Very simply: Supply can’t catch up to accelerated demand,” Goodman says.
When will lumber prices come down? Dustin Jalbert, senior economist at Fastmarkets RISI, tells Fortune that lumber will eventually see a price correction, however, it could take months for any relief to materialize given “the pipeline for lumber and other wood products demand remains quite deep in 2021.”
The wood shortage could even get worse before it gets better. On Friday, the May futures contract price per thousand board feet of two-by-fours jumped to $1,295. That suggests lumber prices are about to see another uptick.
All these delayed DIY projects could act as a floor for prices: As lumber costs start to drop, Goodman says, sidelined buyers could jump into the market thus delaying a larger correction. He said $800 per thousand board feet of lumber could be the new normal. That would give lumber buyers some price relief, however, it’d still be double the $358 per thousand board feet price just a year ago.