Why are lumber prices skyrocketing? The lumber shortage and housing boom, explained.

Why are lumber prices skyrocketing? The lumber shortage and housing boom, explained.

For some people, the journey into America’s lumber crunch starts with the decision to build a new home, or at Home Depot, where the pandemic-driven home renovation craze has contributed to making basic materials pricey and hard to come by. For others, it starts with the memes. The price of lumber has soared over the past year, and it’s an incredibly hot commodity. The internet has taken notice.

“Not even one police escort,” on person on Twitter quipped alongside a photo of a truck stacked with lumber rolling down the highway. Another snapped a picture of a pile of boards in a building, remarking, “Wow, neighbors just casually flaunting their wealth in the hallway.”

While the memes are a joke, the situation is real: Demand for lumber has exploded in recent months, and suppliers have struggled to keep up. Much of the industry has been on its heels since the Great Recession, and it slowed down production accordingly. Those sawmill closures and such aren’t easy to reverse, even if someone might have predicted things would pick up now.

Prices have, in turn, skyrocketed. For years, the price of 1,000 board feet of lumber has generally traded in the $200 to $400 range. It’s now well above $1,000. (One board foot is 12x12x1 inches, and the average new single-family home takes about 16,000 board feet of lumber to construct.) A new house that would have cost $10,000 in wood to get off the ground a couple of years ago now costs $40,000 worth of wood — assuming, that is, you can even get your hands on the lumber.

Most people in the sector expected that Covid-19 would induce an industry-wide slowdown, not an industry-wide boom. Many were caught flat-footed.

“Not only has it surprised me, it’s just surprised the whole industry, how quickly we came roaring back. Housing and construction, repair and remodel, that’s where so much money was pointed by American consumers that the sheer scale of demand was hard to fathom,” Stinson Dean, CEO of Deacon Lumber, a lumber trading company based in Missouri, told me.

In the middle of our call, he had to pause to make a sale. “I’m so sorry, everyone needs lumber, and I have it,” he said after putting me on hold. He explained it probably would have been cheaper for his client, in Texas, to buy the truckload of lumber he just sold them directly from a producer up in Canada, but that producer is sold out through May, and they needed the materials ASAP. “You can’t get anything prompt, and a lot of folks have just underestimated their inventory needs, so they need to lean on folks like me.”

The lumber frenzy is part of a string of unexpected and strange developments in the Covid-19 economy. Before there was the great run on wood of 2021, there was the great run on toilet paper of 2020. The same lockdown boredom and extra cash that inspired some people to get into day trading animated people to decide it was time to fix up their homes. Those who fled cities decided not only to buy existing homes but also to build new ones.

In recent days, I spoke with a dozen people across the lumber industry about the economics of the current craze and why lumber is so expensive and so hard to come by. Many were bemused that anyone was even interested. Panels and two-by-fours and studs are not usually the stuff of public intrigue.

“I honestly don’t know what to make of it,” said Chace Barber, a Canadian logger and truck driver who’s become a bit of a lumberjack TikTok star in recent months, of his newfound internet following. “I guess I’ve been trying to explain as much about logging as I can.” It wasn’t a given that the TikTok crowd would be particularly into his line of work, but the memeification of lumber has certainly helped — not to mention that the 32-year-old Barber is quite attractive. (Though he says he doesn’t get as many DMs as you’d think.)

Barber isn’t the only one who’s puzzled — at the cultural interest, and also the broader situation. Beyond a 2018 blip, the lumber industry hasn’t exactly been thriving lately. “Everybody’s hot and heavy about this business we’re in, and to us, it’s kind of funny, because this is a generational run,” said Chip Setzer, director of trading and growth at Mickey, a commodities trading platform. “I would venture to guess there’s nobody alive that has ever seen what we’re going through right now.”

Hate your house in the pandemic? You’re not alone.

Before we get further into the lumber industry crunch, it’s probably a good idea to explain how the flow of material usually goes: Someone cuts down a log in the forest, it gets put in a truck, and goes to a sawmill or panel mill to be processed into a finished product — a stick of lumber, a sheet of plywood or OSB (oriented strand board), etc. That then goes out into the world to be sold.

Timber and lumber refer to different things: Timber is the raw fiber from the forest, the tree; lumber is a manufactured finished good, like what you’d buy at the hardware store to fix your fence. You can sort of think of the chain like the oil industry. The unprocessed oil is the log, the refinery is the sawmill, and gas is the lumber — the product everyone’s talking about now.

To a certain extent, the story of that lumber mania is a pretty straightforward one of supply and demand: People want more wood than there is to go around.

And while there are places where the supply of timber is tight, there are others where it’s not at all. What’s vexing people trying to build a deck isn’t really a shortage of trees to be cut down, it’s more a shortage of the processed wood you can actually use — the lumber.

When the pandemic hit in the spring of 2020, many people in the lumber industry assumed business was about to go sour. Millions of people were out of work, businesses across the country were shuttered, and the country was in a recession. And so, producers reacted accordingly.

“They really dialed back, thinking that demand would fall, and the reality is that demand never slowed,” said Dustin Jalbert, senior economist and lumber industry specialist at Fastmarkets RISI.

Instead, things sped up. People stuck at home because of Covid-19 shutdowns across the country decided it was a good time to take on home improvement projects repairing and remodeling their homes — they put up fences, added on decks, built out offices, refinished basements. The DIY trend helped drive stellar sales numbers at stores such as Home Depot and Lowe’s.

Many of those who weren’t busy fixing up their homes went looking for new ones. And where they couldn’t find preexisting homes, they started to build. Whatever initial slowdown there may have been in construction pretty quickly subsided. “Us being capitalist America, if people want to buy a house because they want to move out of the city and move to the suburbs, someone will build it for them. They’ll figure out a way,” said Michael Wisnefski, CEO of MaterialsXchange, an online marketplace for lumber and plywood.

Residential housing starts — a metric of when new construction projects start — have consistently climbed, hitting rates not seen since before the Great Recession. The hot housing market helped heat up the lumber market, and in turn, that’s made new housing prices higher.

“It’s adding about $36,000 to the price of a typical newly built home and almost $13,000 to a typical apartment,” said Robert Dietz, chief economist at the National Association of Home Builders.

A line chart showing housing starts from 2000.

New houses are being built at levels the US hasn’t seen since before the Great Recession.
Rani Molla/Vox

It’s worth noting that demand isn’t just surging in North America; it’s also up overseas, which further strains the industry.

The supply side almost didn’t believe the lumber boom

The lumber industry has struggled to recover in the wake of the Great Recession and housing bubble, and a series of economic, regulatory, and environmental issues have weighed it down. In the US and Canada, many sawmills closed up shop altogether or otherwise adjusted operations downward; 2019 was a bad year for lumber in particular.

“You can’t have 12 recessionary years in an industry and not have that industry adjust how it behaves,” said Paul Jannke, principal at Forest Economic Advisors.

In the spring of 2020, in preparation for even worse business, a lot of wholesalers sold off inventory and dialed down operations. As it became increasingly clear that the pandemic might not be such a disaster for the sector after all, it took the industry a while to believe it would last. “They didn’t actually start production up right away, and by the time they figured out this was actually real and it was going to last, they ran into issues with quarantining their employees, so they weren’t able to ramp up production,” Jannke said.

Finding lumber workers was challenging pre-Covid-19; during the pandemic, it’s been even harder. Sawmills have had a hard time staffing up and adding shifts, not only because of Covid-related restrictions and safety measures but also because a lot of people don’t want to work those types of jobs. Some people I spoke with suggested expanded unemployment insurance, which adds an extra $300 a week onto state benefits until September 6, may also be a factor — though, of course, sawmills are making so much money now they might be able to afford to pay workers more and court them back.

Steve Swanson, who runs one sawmill and two plywood mills in Oregon, is among those who have worked to keep up with the current demand. “At these price levels, we’re doing very, very well,” he said. “We suffered dramatically over the last decade, and now we’re getting rewarded for having the tenacity to stay in business.”

Still, things could be better. Since 2007, he sold off one sawmill and completely shut down two others; he employs about 700 workers now, but with those jettisoned operations, he estimates he’d have employed 500 more. He notes that many people just don’t understand how hard it is to get a sawmill up and running. “They’d like to see our industry respond to these prices and make new lumber, but a new sawmill today is $100 million, it takes two years to build, and there’s no guarantee you’re going to have the raw materials to run it.” Plus, who knows how long this current surge will last.

The lumber supply chain, up and down, is tight, from the trucks and railcars moving materials from point A to point B, to workers to staff the lumber yards and sawmills, to, of course, the logs themselves. You can’t grow a tree overnight, or get it to the sawmill to turn it into lumber. And once you cut a tree down, it takes years to grow it back.

In the Pacific Northwest and British Columbia, where many of the logs come from, the “timber baskets,” or how much wood is available to cut, are fairly constrained, Jalbert explained. About 30 percent of US lumber consumption is from Canada, and a lot of it is from British Columbia, and they’ve been dealing with a multi-decade beetle infestation that’s hurt the supply. Wildfires pose a threat to logging in those areas, and there’s an ongoing battle between conservationists and loggers in the Pacific Northwest, where logging on federal lands is restricted.

On the other hand, in the US South, another area abundant with timber, the problem is sort of the opposite. “They have a glut of timber,” Jalbert said. Until the region has enough sawmill capacity to turn that timber into lumber, however, production will remain slower than it could be.

“We’re finding that we have a huge inventory of trees ready to be harvested. There’s this increased demand on the lumber side of things with the same production capacity … but the production side has all they need as far as the logs to produce lumber,” said Dan Hockenberger, the owner of Virginia Forest Resources, a timber company.

And even if it were to ramp up, softwood lumber from the Pacific Northwest and British Columbia isn’t necessarily interchangeable with what’s being produced in the South, said Dean, the lumber trader. “The lumber that is produced from a Southern yellow pine tree does not have the same use cases as lumber that’s produced from a Canadian spruce tree,” he said. But out of necessity, many builders are figuring out how to adjust and use more of what’s available.

This disconnect between raw materials and processing capacity means that the wealth of the lumber boom isn’t really being shared up and down the supply chain, and many of the people growing trees are being left out. Timber prices in many places have remained stagnant, especially when you account for taxes and inflation. “We are swimming in wood in the South,” said Brooks Mendell, chief executive of forest supply researcher Forisk Consulting. “The sawmills can just buy what’s out there, there’s so much available. We have an imbalance.”

For his part, Barber, in Canada, isn’t seeing much of a bump in his paycheck. “The price of lumber has gone way up, the mill’s making a lot more money, but they’re not paying us any more,” he said. “It’s funny how that works.”

The lumber frenzy is raging, and there’s no clear end in sight

The surge in demand and dearth of supply in lumber are causing all sorts of volatility and distortions in the market. The lumber futures market keeps hitting new highs, surpassing $1,400 per 1,000 board feet, and things might be about to get even wilder. The cash market — meaning the actual physical product — is booming. Some sawmills are selling boards before they’re even cut. Those in search of lumber are paying a high price to get it, if they can get their hands on it at all.

“I have customers in foreign markets that are like, ‘I will wire transfer you $1 million right now, can you just get me some product?’ And no, I can’t,” Setzer, the commodities trader, said. He described having to place countless calls to truckers just to get something moved, and said he tells members of his team to sometimes pad their numbers on quotes to buyers because prices are moving so quickly that “you’re going to end up taking a loss on stuff if you quote it cheaply.”

Lumber futures contracts as far out as November remain above $1,000, suggesting things might not settle down anytime soon. While the music’s going, producers are going to keep on dancing — and, if they can manage, dancing faster.

“We simply respond to the higher prices,” Swanson said. “Why would I sell lumber at $800 per 1,000 board feet when others are offering me $1,500? It’s a commodity not any different than oil and gas and corn and orange juice — when there’s not enough of it to go around, the price goes up.”

There’s consensus that the lumber mania will slow down at some point. Eventually, prices will settle back down and sawmills will catch up. But nobody is quite sure when. The spring and summer building season is upon us, and if demand didn’t slow down this past winter, it’s not going to right now. If there is a slowdown in the coming winter, combined with strong production in the mills, that may allow the chain to get back into equilibrium. By and large, everything settling down and the supply chain getting in order is going to take time.

“In forestry, this sort of rebalancing takes time. The trees take a long time to grow, and it takes years to build a new mill,” Mendell said.

While some people have pointed to lumber prices as a sign of increasing inflation and a sign that the economy is overheating, there’s really not much that, say, the Federal Reserve can do about it. Increasing the federal interest rate, for instance, might discourage people from building homes, but it might also deter lumber producers from making the investments to up their sawmill capacity.

“If we’ve got supply-side constraints, the best way to battle supply-side constraints is more supply,” Dietz said. “We need more sawmills, and that takes capital.”

Duties on Canadian lumber, currently at 9 percent, may have driven up prices in the past, but that’s not really what’s going on right now either. Given how much prices have skyrocketed, that 9 percent is pretty negligible.

Dean said he doesn’t expect to get back to pre-Covid-19 lumber pricing, but he does think the situation will moderate. “People are only paying these high prices because they have to, and eventually those people who have to buy lumber will buy enough and we’ll be able to breathe and prices will reset. To me, the question is, where will we reset?” he said.

To be sure, one nagging question is why soaring prices and scarce lumber haven’t caused a slowdown already. You might think that if it’s so hard and expensive to build out your deck right now, you might wait until next year. But thus far, that’s not what’s happening.

The situation has also sprouted conspiracy theories that there isn’t a shortage at all — you don’t have to dig very far into the internet to find theories that there’s a plethora of lumber out there and that the lumberyards, mill owners, and other powers-that-be of the forest are just hiding it. The experts I asked about the conspiracy theories laughed them off.

“They’re not hiding the boards, they’ve got nothing. They’re going to sell every board they can at these prices,” Mendell said.

Dean also pointed out that what looks like a lot of lumber to a regular person is not actually a lot of lumber, despite what the truthers out there might believe. Again, it takes thousands of board feet of lumber to construct your typical single-family house. “A lot of the lumber you see is already sold, it’s already committed, so it’s not available for sale on the open market.”

“That conspiracy is crazy,” Barber said. “If you just see the trucks go in and out, you can see the lumber cycling.”

Hockenberger, the timber company owner, initially thought that I might be a lumber truther reaching out to him to talk conspiracies. “Nowadays when somebody wants to talk to you about the topic, you don’t really know what their intent is with that information,” he said.

Lumber isn’t the new GameStop … or is it?

The finance industry has birthed a number of memes in recent months — you’ve got the meme stocks like GameStop, the Fed-dedicated “Money Printer Go Brrr,” and Dogecoin, for example. And now, you can add lumber to this list.

Reporting for this story, I discovered that lumber Twitter is definitely a thing — and figures such as Dean (@LumberTrading) and Jalbert (@2x4caster) are among the stars of it. Some of the discussion is serious, and a lot of it is jokes. Snap a picture of some wood, toss off a one-liner about how much money it’s worth, and you’ve struck meme gold.

Workers at places like Home Depot, who are experiencing the lumber craze firsthand, are in on the joke, too. “Customers pressing me about why I don’t have lumber like I’m suppose to go out back and cut a tree down for them,” one user recently joked on the r/HomeDepot page on Reddit.

One Wisconsin consulting forester, who asked to remain anonymous for the confidentiality of his clients, says he’s seen more interest among people looking to get into growing timber given the lumber craze … and he’d advise thinking about it practically before jumping in. “They think it’s cool or this is the next bitcoin, but then they also have to realize that this is big enough, complex enough, that they’re going to have to commit to it. People that do commit to it, I think they see pretty quickly that this isn’t going to be a get-rich-quick type thing,” he said.

For now, most of the people involved are having fun.

Barber got into TikTok less than a year ago after some of his coworkers told him to give it a try. “I notice truckers do really well on TikTok, and my only theory is we have a lot of time during the day to sit and think about things,” he said. He now has about 300,000 followers.

He’s still a little befuddled about having found an audience — his most popular videos are just him sharing random information about his truck and about logging. “Little fun fact about logging trucks: There is actually nothing that secures the logs to the truck. The only thing holding these things to the truck is gravity and Jesus, I guess,” he said in one recent video, filmed as he walked around his truck. It got nearly 700,000 views.

When we spoke, he talked about another video he filmed of himself driving his truck down the middle of a snowy road, tying it back to the lumber surge that’s made him a star in the first place. “This is why lumber’s so expensive, guys,” he said. “You’ve got to pay me to drive down the side of a cliff.”

Even some people within the industry are frustrated with the price of lumber when it comes to their own personal plans. “I have a garage I was wanting to build over a year ago, and I’ve been waiting for prices to drop,” Hockenberger said. “I should just buy a sawmill.”

Rani Molla contributed data reporting to this article.

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