Main Content

Lumber Futures Drop Drastically, Prospective Homebuyers Stand to Benefit

The Real Deal

Everything Real Estate in the San Fernando Valley
Friday July 2, 2021
Lumber Futures Drop Drastically, Prospective Homebuyers Stand to Benefit

Much to the new construction industry’s dismay, the cost of one thousand board feet of lumber hit $1,670.50 on May 7, 2021 (a 400% increase since the COVID-19 crisis in April 2020). The cost of lumber adversely impacted prospective home buyers for a number of reasons: (1) the cost of building new homes became roughly the same as purchasing an existing home; (2) because the costs were comparable, many buyers opted to purchase existing homes rather than wait for new construction to complete (think of it as an opportunity cost calculation); (3) because new homes weren’t being built, the record-low housing inventory remained low; and (4) because inventory was low, and demand was high, the average home price has been increasing at a significant rate. However, there is good news on the horizon for prospective homebuyers: lumber futures decreased by 40% in June 2021, the worst month for lumber futures since 1978. Moreover, lumber is down 18% in 2021, which represents the first negative half-year since 2015.

(Source: CNBC Website: Lumber prices dive more than 40% in June, biggest monthly drop on record)

In early 2021, several lumber mills shutdown during the COVID-19 pandemic, and the country saw a surge in demand for new construction and home improvements. According to the National Association of Home Builders (“NAHB”) the average price of a new single-family home increased by roughly $36,000.00.

As lumber prices continue to decrease, and the number of mortgage applications decrease, prospective home buyers can expect the housing market’s explosive surge in pricing slowdown. This is not to say that the housing market will suddenly crumble, investing in a home is still an extremely safe investment, but price growth should slow down over the next few months.

At the Chernov Team we understand that knowledge is power, and knowledge of how the price of lumber impacts the housing market, in a way that benefits prospective buyers, is powerful knowledge indeed. At the Chernov Team we know that whoever comes to the table most prepared leaves with the most, and the Chernov Team always leaves the table with the most.

08

Stay Connected

Sign up to Access:

Exclusive private listings S.F. Valley market insights VIP events

    Thanks for signing up!
    By signing up you agree to our Terms & Conditions

    More Blog Posts

    To Love
    Monday July 26, 2021

    In June 2021, the volume of new home sales dropped to its lowest level since the onset of COVID-19 in early 2020. T...

    Read Full Post
    Friday July 23, 2021

    While June home sales were lower than expected, they still represent a rebound after 4 consecutive months of declin...

    Read Full Post
    Wednesday July 21, 2021

    According to date released by the U.S. Census Bureau (“USCB”) on Tuesday, July 20, 2021, building permits dropp...

    Read Full Post
    Monday July 19, 2021

    In August 2020, the Federal Housing Finance Agency (“FHFA”) announced that Fannie Mae and Freddie Mac would cha...

    Read Full Post
    Friday July 16, 2021

    It appears that the rate of appreciation in home values, despite slowing down, will continue to increase for the ne...

    Read Full Post
    Wednesday July 14, 2021

    We’ve been seeing a lot of discussion about inflation recently, and that discussion is warranted; housing costs ...

    Read Full Post