CANADA; HEWERS OF WOOD
Lumber prices hit a record high after soaring more than 250% in the past year
wdaniel@businessinsider.com (Will Daniel) 

© Ana Johansson/Getty Images Ana Johansson/Getty Images

Spot lumber prices hit a record high of nearly $1200 per thousand board feet on Tuesday.
Prices have soared more than 250% in the past year alone.

Rising lumber costs added more than $24,000 to the price of the average new single-family home.

Spot lumber prices hit a record high of nearly $1200 per thousand board feet on Tuesday.

The record mark comes after a historic run for lumber in 2020 and the beginning of 2021. Prices have soared more than 250% in the past year and roughly 348% from March 30, 2020 five-year lows.

The rising lumber costs have added more than $24,000 to the price of the average new single-family home, and nearly $9,000 to the price of a multifamily home in the past year alone, according to data from the National Association of Homebuilders.

Sales of newly built, single-family homes also fell 18.2% in February, partly due to lumber costs, according to newly released data from the US Department of Housing and Urban Development and the Census Bureau.

Lumber's rise hasn't been all bad news for the markets, however. As a result of rising lumber prices, shares of timber companies have surged in the past six months.

Vancouver-based Canfor saw its stock jump some 107% during the period while shares of West Fraser Timber and Weyerhaeuser jumped roughly 80% and 30%, respectively.

A number of factors have combined to create the perfect storm for rising lumber prices over the past few years, starting in 2019 when weak demand and severe weather conditions caused timber suppliers to close mills and reduce output.

"In North America, lumber demand was impacted by severe weather early in 2019...tepid demand, combined with excess inventory levels heading into 2019, resulted in significant downward pricing pressure throughout most of the year," Canfor's management wrote in a 2019 statement to investors.

"In response to the muted demand and elevated log costs in BC, a number of temporary and permanent sawmill curtailments were announced across the industry throughout 2019," management added.

Then in 2020, interest rates were cut and demand for new homes and lumber soared due to the new stay-at-home dynamic.

A plague of pine beetles in British Columbia also destroyed enough trees to build millions of single-family homes throughout the year, Bloomberg reported.

All of this led to a supply and demand imbalance which has caused a sustained rise in lumber costs.

Devin Stockfish, the CEO of Weyerhaeuser, said last month he expects lumber prices will remain elevated "for the foreseeable future," per Bloomberg.

The National Association of Homebuilders has been pressing the Biden administration, federal agencies, and Congress to step in and address lumber supply shortages.

The association sent a letter to President Biden in late January after his election and has since lobbied Congress, Agriculture Secretary Tom Vilsack, and the US Forest Service in hopes of breaking the lumber pricing trend.

So far though their efforts haven't been fruitful and lumber prices continue to rise.

The phrase “hewers of wood and drawers of water” comes from the Bible, but it was the Canadian economist Harold Innis who used it in his 1930 book, The Fur Trade in Canada, to describe our traditional economic dependence on resource production.