Lumber futures for July experienced a dramatic push and pull yesterday as prices fell 5%, then quickly jumped back up. Lumber futures fell to $1,201 per thousand board feet yesterday morning, but then increased back up 5% by the afternoon, reports CNBC. Lumber prices hit a record high on May 10 when it reached $1,711 per thousand board feet, and the current price remains up 37%. The reasoning for the unprecedented high? Home builders pulling back, says CNBC. Price is stifling demand, said one commodities broker, which includes home builders slowing single-family production in April.
Single family housing starts dropped 13% in April, the biggest decline since the Covid pandemic hit, data this week showed. The rise in lumber costs was partly to blame for homebuilders slowing production even as housing demand increases.
Cross explained that while lumber looked overbought as recently as earlier this month based on price and technical metrics, he said its recent pullback is starting to appear overdone in the opposite direction.
“I do believe that in the market we are going to see a dead cat bounce. When the market got up to $1,733, that was the most overbought lumber market in history. Technically speaking, not just on price,” he said. “Now, sitting at $1,201 and a singular straight line [downward], it’s not quite the most oversold market in history. But it’s pretty damn close.”
Cross made his remarks before lumber’s afternoon recovery.