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Perfect storm of supply, demand causes lumber prices to skyrocket

For those that have tried to build a back deck or build a home, it is known that the price of lumber has skyrocketed in the past year.

Carolina Millworks owner Jimmy Cox said it has been several things that have caused the price of lumber to go up.

“It really comes down to supply and demand,” Cox said. “Part of it is labor force and part of it is a shortage of raw materials. With all of those factors, it is kind of like a perfect storm.”

Cox has been in the lumber industry for upwards of 40 years and he said he has never seen something like this.

“In a year’s time, the price has gone up by at least 50 percent,” Cox said. “We were selling a pack of two by fours for $6 last year. They are $20 now. For a bundle of 2, 4, 16, it is now $3,000, but interest is still cheap. So, lumber can be high and interest is low and you can still come out on top. It will never be where interest is low and lumber is low.”

Even with the price the way it is, Cox said he is the busiest he has ever been.

“I’m hoping the price is going to go down,” Cox said. “It has to go down or people will stop building. We have been open 20 years and this is the busiest we have ever been. Even with the price going up, people are still coming in. We need 4 million houses right now in the United States of America. So, people are going to buy because they have to build. If they need it, then they are going to have to buy it.”

Another reason for the price of lumber being so high according to Cox is the workforce at different mills.

“A lot of mills were having to work at half production or a third of production,” Cox said. “Also, there were less materials in the marketplace. It’s all just supply and demand. The supply was low and the demand was high.”

The inability to provide enough lumber has increased the average price of a new single-family home by more than $35,000, the National Association of Homebuilders said Wednesday.

“The pipeline for lumber and other wood products demand remains quite deep in 2021… Builders have plenty of ongoing projects to keep working through, which is keeping lumber and panel demand high, and making it very difficult for mills to ramp production up fast enough to rebalance the market,” says Dustin Jalbert, senior economist at Fastmarkets RISI, where he specializes in wood prices.