Mon - Fri : 09:00 - 17:00

Stock up on wood! The price of timber in North America has plummeted! What is the impact on the real estate market?

As a result of the covid-19 pandemic, wood prices in North America have soared. Similarly, Canadian timber prices have plummeted like a roller coaster.

The timber price has risen 5times ever since the beginning of the pandemic. Especially in the United States, the U.S. government’s record reduction in mortgage interest rates has triggered an unusually hot U.S real estate market.

In addition, due to the decline in the production capacity of logging plants in the early stage of the pandemic, restrictions on home orders during the pandemic, and more and more homeowners starts to renovate their houses, the demand for wood has greatly increased.

In May 2021, U.S timber prices hit a record high, reaching $1733.

Compared with the US$300 in 2020, the price of woods has increased nearly 5 times!

According to the Housing Finance Agency(FHFA) housing price index, in April 2021, housing prices in the United States rose by nearly 1%.

Compared to 2020, it has risen by more than 11%.

In 2020, US house prices rose by 10.8%, setting a record for the highest annual increase in history.

As the supply of wood continues to increase, demand for residential construction has slowed.

U.S timber prices began to fall sharply. Timber futures fell by 42% in June alone, marking their lowest month since 1978.

At the same time, it also became the first decline since the first half of 2015.

Just like the United States, Canadian timber prices are like a roller coaster.

Since the beginning of the pandemic in Canada this year, workers have stopped work and construction has stalled, and the Canadian timber business has begun to slow down.

With the low mortgage interest rate policy implemented by the Canadian government; the continued growth in the real estate market, and the increasing demand for home decoration under the pandemic home order measures, the demand for wood has increased rapidly, and the price of wood has skyrocketed ever since.

In August 2020, the price of spruce, pine, and fir 2×4 lumber per thousand board feet soared by 82 Canadian dollars a week, reaching a staggering high of 760 Canadian dollars.

By May 2021, Canadian timber prices have hit a record high of 1,600 Canadian dollars per 1,000 board feet!

This price became 5 times the price at the beginning of the pandemic.

There is a timber company based in Oshawa, Ontario, said the retail price of timber has plummeted in recent weeks.

An 8 foot long, 2×4 inch piece of lumber sold for 12.65 Canadian dollars on June 1, and is now 3.95 Canadian dollars.

The falling price is basically the selling price of the timber before the explosion

It is worth noting that the rate of price decline is even faster than the rate of increase.

This means that many retailers are selling wood stocks purchased at higher prices at a loss.

Some timber retailers said that with the advent of summer, the relaxation of restrictions on the pandemic in various places has led to an increase in travel in Canada, and people’s spending and time on houses have been significantly reduced.

The plunge in timber prices has led to substantial reductions in production by timber manufacturers.

On August 20th, the Vancouver-based timber mill announced that it would reduce its timber output by two weeks at its sawmill in British Columbia.

Regards on the impact to the real estate market, many citizens said that the North American timber market has undergone such drastic changes, and now that timber prices have plummeted, can it reflect that demand in the real estate market has not been so hot?

The chief Executive Officer of the Canadian Association of Home Builders said that in the construction of new houses, the challenge of the material supply chain related to the pandemic should continue.

Therefore, the pricing of these related products has become more complicated.

Although the current difficulties related to wood have eased, home builders are still dealing with the delivery delays and price increases of everything from plumbing and electrical products to kitchen cabinets.

As prices in many countries with the pandemic have risen serval times, in Canada, the prices of everything including kitchen sinks have risen by an average of 10%.

And the pandemic has not yet ended, so the supply of many materials is still delayed or unavailable. With the advent of autumn, timber prices will rise slightly.

Canada reopens its borders may spark a new housing boom Bank of Canada 'in a pickle' when it comes to housing: National Bank