Lumber Prices Explained: What DIYers Need to Know

Lumber prices impact much more than just the lumber industry. For homeowners, fluctuating lumber prices can alter budgets for home improvement projects, additions and new home construction plans. During the COVID-19 pandemic, many of my customers decided to hold off on planned projects to wait for lumber prices to fall. Some asked me to explain rising lumber costs to them, which proved to be a complex process.

Ahead, find a straightforward breakdown of the key elements affecting lumber prices, from market demand to futures trading, with insights from Michael King from Fleury Lumber.

Are Lumber Prices Going Up or Down in 2024?

Lumber prices appear to be going down in 2024, though incrementally. After experiencing severe volatility during the pandemic, lumber prices have been trending downward since 2022. Depending on what happens during the rest of 2024, prices appear to be on track to stay about the same. “Everything seems to be pretty stable,” King says, “unless something happens to send prices up again.”

What Is the Average Cost for Lumber?

As of this writing, average costs for lumber are as follows:

How Are Lumber Prices Determined?

Many factors determine the price of lumber, from hyper-localized weather events to global financial markets.

What factors impact lumber prices?

Lumber prices are always related to supply and demand — the amount of lumber available compared to the amount consumers need. If supply is higher than demand, prices are lower, and prices rise if there is more demand than supply.

What factors impact lumber supply?

The amount of lumber harvested, produced and shipped is influenced by several key elements in the lumber supply chain. “Availability is a key price factor,” King says.

• Production: Production levels can be affected by labor issues, sawmill closures and land access.
• Natural disasters: Weather events can greatly impact the amount of available raw lumber. “Some of the hurricanes in the past have caused plywood prices to go up temporarily,” King says.
• Government policies: Forestry management laws, international tariffs and environmental policies control the amount of lumber that can be produced and exported.
• Shipping and receiving: How quickly lumber can be transported to consumers contributes to supply levels. “Through COVID, we couldn’t get anything,” King says, contributing to higher prices.

What factors impact demand for lumber?

Demand levels for lumber fluctuate due to economic and consumer trend cycles.

• Economic conditions: Times of economic growth typically lead to increased home construction rates and rising lumber demands.
• Interest rates: Low interest rates mean lower borrowing costs, which stimulate new construction projects and, in turn, increase the demand for lumber.
• Construction industry: More new construction projects cause a higher lumber demand.
• Consumer trends: Homeowner demand for lumber-based home improvement projects like decks and additions can impact lumber prices.

Lumber Futures Explained

Lumber contracts bought and sold in a regulated commodities market and lumber futures also influence lumber prices.

What are lumber futures?

Lumber futures are high-volume lumber contracts traded by investors and lumber industry stakeholders through the Chicago Mercantile Exchange (CME). Similar to the New York Stock Exchange, the CME trades commodities and goods contracts rather than stocks.

How do lumber futures work?

Lumber futures contracts are standardized to facilitate trading within the CME. Standardization includes order size (typically 27,500 board feet), price per thousand board feet (varies) and delivery schedules (specific months). Lumber producers, sawmills or large construction companies buy and sell these contracts to minimize their exposure to price volatility. Investors can also buy lumber futures.

Most lumber futures contracts are bought and sold before expiring. Instead of receiving delivery of the lumber, the contract is sold for a cash loss or profit.

How do lumber futures affect retail prices?

Lumber futures provide a market outlook several months ahead, which impacts price expectations. When futures prices rise, retailers expect to pay higher prices to replenish their inventory, so retail prices rise. If futures prices drop, retailers can lower prices as the expected price to replenish stock decreases.

Lumber futures also provide consumers with relatively stable lumber prices.

Lumber futures prices now

From the summer of 2020 to spring 2022, the lumber futures market experienced unprecedented instability due to the COVID-19 pandemic.

In January 2020, lumber futures were trading at $435.50 per thousand board feet (MFBM) and had reached $980 MFBM by the end of the summer. After a brief dip in the winter, by the spring of 2021 prices had shot up to $1,500 MFBM due to labor shortages, a spike in demand and delivery delays. Several more drastic ups and downs occurred until prices finally stabilized in the summer of 2022.

FAMILY HANDYMAN

As of this writing, lumber futures are trading at $446 MFBM, and 2024 prices are down 15.2 percent from last year.

Hardwood vs. Softwood Prices

Retail lumber prices are different for hardwood and softwood species.

How are hardwood prices determined?

Hardwood prices consider the wood species, the grade and the cut of the wood.

Why is hardwood more expensive?

Hardwood trees grow slowly and are subject to more environmental regulations, which limits supply. “There are fewer hardwood trees, and it is harder to find,” King says.

Four Tips for Saving Money on Lumber

Reduce waste

Plan your project and lumber order carefully to maximize board usage. “Try to end up with the least amount of waste,” King says. This will save you money.

Buy from a wholesale lumber provider

Wholesale lumber companies buy high-volume orders for less and can pass these savings on to you.

Use lower-grade lumber

Use lower-grade lumber in places that will not be seen and save more expensive finish-grade lumber for visible surfaces.

Use shortboards

Lumber shortboards are shorter lengths of lumber, typically less than 8 feet, that can be used for smaller projects to minimize waste.

Purchase in volume

For larger projects, it can save you money to purchase all of your lumber at once.

About the Expert

• Michael King works in contractor sales at Fleury Lumber, a full-service lumberyard in Easthampton, Massachusetts. He has worked at Fleury Lumber for over 20 years in various roles.

Sources

• CME Group, An Introductory Guide to Random Length Lumber Futures and Options.
• Madison’s Lumber Report, Lumber Prices Go Lower as Summer Downtime Approaches. (2024)
• Statista, Monthly Price of lumber in the United States from January 2016 to February 2024. (2024)