Since the pandemic, lumber prices have skyrocketed to record highs, adding to new-home construction costs. But prices are now coming down. The long awaited relief is finally but slowly stabilizing and headed in the other direction. Lumber prices have fallen 12% this week, reaching a new low in 2022.
That could be welcome news for new-home buyers and builders. Over the past year alone, the swings in lumber prices have prompted the price of a new single-family home to rise by more than $18,600. This information comes from the National Association of Home Builders.
In the last three months, lumber prices have started to come down as the housing market shows signs of slowing and interest rates rise. A glut is forming in the lumber market as inventories begin to pile up. According to The Wall Street Journal reports, lumber buyers have slowed their orders, and sawmills are beginning to slash their prices.
Lumber prices have fallen 47% year to date. They are down 65% from a 2021 record high of $1,733 per thousand board feet. The big drops should help ease inflationary pressures in the housing market. Also, the costs to build should come down, Markets Insider reports.
Dustin Jalbert, a senior economist who leads Fastmarkets RISI’s lumber team, told Fortune that lumber’s volatile cycles in recent years is likely over—unless an unforeseen economic crisis erupts. “I think the worst is behind us now,” Jalbert told Fortune.” He also says “there’s a lot of “concern” about what lumber demand will look like in the second half of the year as recession predictions grow.
There’s still a backlog in fulfilling demand and supply issues—which triggered the record prices in the first place. Producers are focused on getting through their current commitments. This should lead to lower futures prices moving forward, Kyle Little, chief operating officer at Sherwood Lumber, told Fortune.
Lumber prices will likely moderate to between $450 to $600, but they won’t collapse, Jalbert told Fortune. Also, “there’s still decent underlying demand that will support housing construction,” he adds.
Signs Show Naples Housing Market is Regaining Balance
Naples, Fla. (May 23, 2022):
Overall inventory in Naples during April increased 16.5 percent to 1,668 properties from 1,432 properties in April 2021.
Fueled by a swell of new single-family home listings, up 5.7 percent over last year, broker analysts reviewing the April 2022 Market Report by the Naples Area Board of REALTORS® (NABOR®), which tracks home listings and sales within Collier County (excluding Marco Island), are confident the Naples area housing market has reached a crossroad and is making its turn toward a balanced and healthy market.
“It’s been thirty months since we’ve seen this many single-family home sellers enter our market in one month,” said Bill Coffey, Broker Manager of Amerivest Realty Naples. Coffey, along with several top brokers in Naples, say the shift indicates the Naples area housing market is redefining itself.
Another major factor that signified the market was self-correcting to a new normal in April were the 549 price reductions (33 percent of the inventory) during the month.
“What we are seeing today are more sellers setting realistic list prices from the start and more buyers less willing to settle for homes that don’t meet their exact needs and desires,” said Brenda Fioretti, Broker Associate at Berkshire Hathaway HomeServices Florida Realty, who added that the report showed “we now have 1.5 months of inventory, the highest level since March 2021.”
Demand for the Naples lifestyle remains strong. Days on market for April was 16 days, considerably less than the historic 90-day average. As inventory begins to rise, days on market may increase and list prices in some neighborhoods may shift down slightly; but broker analysts agree that we should not expect home prices to drop to anywhere near pre-pandemic levels.
“There is virtually no data in the MLS for home sales below $300,000,” said Molly Lane, Senior Vice President at William Raveis Real Estate. Coffey remarked that the $300,000 and below market was once the biggest category for closed sales in Naples.
But rapid sales during the last 18 months severely depleted inventory in this price category. As such, there were only 96 properties below $300,000 in April’s inventory.
The overall median closed price in April increased 39.2 percent to $599,000 from $440,000 in April 2021. The uptick reflects the low number of sales in the $300 and below price category.
Median closed prices continue to rise in the single-family home market, up 8.7 percent from March, but median closed prices during April in the condominium market decreased 1.1 percent from March.
