Lumber Prices Crash

As mortgage rates rise, lumber prices have gone down by 5%.

According to Insider, the price of lumber have crashed 30% over the past two weeks as rising mortgage rates help cool down the US housing market.

Lumber traded limit down multiple times last week, and was down about 5% on Tuesday. The essential building material hit a high of $1,338 per thousand board feet on January 14 before trading to a low of $934 on Tuesday. The average 30-year fixed mortgage rate has been surging recently and jumped 50 basis points to 3.55% in late January ahead of anticipated interest rate hikes from the Federal Reserve later this year.

And even before January’s spike, the housing market was already feeling the effects of rising mortgage rates. US pending home sales fell 3.8% month-over-month in December, and were down 6.9% year-over-year, according to the National Association of Realtors..

“The market will likely endure a minor reduction in sales as mortgage rates continue to edge higher,” NAR chief economist Lawrence Yun said.

A prolonged cooldown in the housing market could help lessen demand for lumber and thus result in lower prices, at least temporarily. There still remains a shortage of new homes for sale and the millennial generation is just starting to graduate from student loan debt to mortgage debt, suggesting demand for homes will remain strong.

But any temporary drop in demand for lumber would be a big relief for its supply chain, which still remains disrupted due to a major storm in British Columbia late last year that washed out rail lines that lumber mills depend on, among other factors.

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