What the Yo-Yoing Cost of Lumber Tells Us About the Future of Home Building

The building you’re sitting in right now is probably made of wood. The frame might be constructed from spruce, pine, or fir. Maybe the floors are oak, walnut, or cherry. The plywood partitions and walls probably use a combination of softwoods, and the cabinets could be built with decorative plywood using species like walnut, birch, maple, and mahogany. If you live in a big new apartment building, the structure might even be framed with mass timber, a composite material that’s gaining adoption as a strong, fire-resistant, and low-carbon alternative to steel. 

Over the last year, the price of all of these materials has gone through the cedarwood roof. 

Lumber has hovered between $300 and $500 per thousand board-feet for the past few decades. But in December, according to the National Association of Home Builders, it crossed $600. Then in January, it surpassed $900. It went over $1,200 in April, and peaked, at the end of May, around $1,500—an unprecedentedly fast and steep increase in costs for one of the most basic building blocks of the built environment. As of early July, the price had dropped down below $800 per thousand board-feet, but was still holding well above the pre-COVID norm. 

The cause of the spike, industry experts say, was the sudden shutdown of sawmills in the United States and Canada when the pandemic hit North America, coupled with a relatively slow reopening under work-safe conditions. (Wildfires and beetle infestations, exacerbated by climate change, have also been longer-term factors in shaking up lumber supply chains, as The Atlantic reported.) The lumber industry, like many others, expected that the shutdown would wreck the housing market as the economy headed on a downward spiral. But while there was a pause in housing construction, American households found themselves spending lots of time at home, thinking about the improvement projects they’d never gotten around to. Many of those homeowners, aided by federal stimulus checks, raided Home Depot and Lowe’s for DIY building projects. And, with mortgage interest rates dropping and newly remote workers hungry for more domestic space, home prices surged, and the construction industry’s halt was short-lived. 

"Normally during a recession, demand slows down," says Brooks Mendell, CEO of Forisk, a forestry consulting and research firm based in Athens, Georgia. "That didn’t happen." 

Now, even with costs dropping as sawmills catch up with demand, industry insiders don’t expect lumber to permanently return to its pre-pandemic prices. Low prices will cause people who were waiting out the surge to restart the projects they paused, predicts Russ Vaagen, CEO of Vaagen Timbers, based in Washington state. Inflation could also be affecting the cost of lumber along with a range of other materials. Vaagen expects lumber to settle in a new trading range sometime later this year, and for it to be significantly higher than it was before the pandemic. 

The price surge suggests that housing, already much too expensive for many Americans to afford, is only going to become more costly. But it also shows the staying power of lumber as a renewable resource for building—and the need for a long-term commitment to more sustainable forestry practices. 

Developers have shown more interest in light-gauge steel and concrete over the last year, particularly for multifamily housing, but the costs of other materials have gone up as well, says David Logan, senior economist at the National Association of Home Builders. There are no readily available lumber alternatives for most home-building projects, he says. 

Over the long term, higher material prices could mean heightened competition for housing supply as new units grow more expensive to build. Brian Court, a partner at The Miller Hull Partnership, a Seattle-based architecture firm focused on sustainable design, says that project budgets have expanded by 50 to 100% because of lumber and other material cost increases. That has meant some projects being delayed or broken into phases. Tim McDonald, CEO of Onion Flats, a Philadelphia-based architect and developer, says the firm canceled an 88-unit project it was planning to build earlier this year, and the cost of lumber was what "tipped the scales."

"Let’s not forget that affordable housing is an oxymoron."

—Tim McDonald, Onion Flats

Any loss of new housing could increase demand for existing apartments and raise costs on tenants, nearly half of whom already spend more than 30 percent of their income on housing. The crisis highlights the urgent need for governments to fund more affordable housing projects—though this, of course, is far from simple. Already in California, according to the Terner Center for Housing Innovation at UC Berkeley, the cost of new low-cost housing projects is close to half a million dollars per unit.