It’s been a bad month for lumber futures which will eventually translate to good news for consumers. Lumber futures dropped 40% in June making it the worst month on record since 1978. In case you were unaware, the lumber industry suffered huge shortages from supply chain issues. The price of a 2x4x8 stud in February of 2020 was about $4 and has been reported as high as $15 each! This has contributed to the slowdown of homebuilding and getting those DIY projects finished.
Why are they crashing?
Futures are falling for a few reasons. Lumber is a very labor-intensive commodity to deal with. 2020 depleted supplies completely with mills being shut down and freight moving slower. It takes months to build supply back up while simultaneously keeping up with demand. With many home builders opting to delay new constructions because of the high prices, the drop in demand has allowed lumber stockpiles to replenish.
When will the price come down for consumers?
Futures dropping is great for consumers but unfortunately, it is not an immediate decrease at the store. Retailers purchased lumber at higher prices and will need to slowly drop the price so they do not lose money. Lumber is typically a very low-profit margin item because it is usually in high demand. Over the last month, a 2x4x8 has dropped from an average of $10 down to around $7 according to Home Depot. Prices should steadily decline over the next 8-10 weeks and hopefully, find a new normal.