Falling Lumber Prices Reflect a Return to Normal for the Housing Market
According to BusinessInsider.com, lumber prices hit a new low this week of $495 per thousand feet board. Prices had increased during the pandemic as demand for homes was high and saw mills had difficulty fulfilling orders. But as the market returns to normal, higher mortgage rates are helping to slow down the booming housing market, decreasing home builders' demand for lumber and lowering its prices. The decline in lumber prices also suggests that inflation could be easing.
"For the last couple of years it's just been an unbelievable market where all the builders are taking orders, everybody is having phenomenal success, everybody is having phenomenal margins," LGI Homes CEO Eric Lipar said in the company's earnings conference call on Tuesday.
LGI Homes is a builder of single family homes across Western and Southeastern states and has benefited from the higher margins amid the COVID-19 induced housing demand boom. But those margins aren't sustainable as demand for homes cools down and prices show signs of falling in some markets.