Since the outbreak of the pandemic in 1918, the lumber price has been on a wild ride. It’s now at the top of its escalator. 

In December, lumber prices rose again after falling from an all-time high of May last year. According to Random Lengths, they are currently about 22% below their peak but about three times the average price before the pandemic. 

It is increasing both the price of building new homes and remodeling older ones. According to the National Association of Home Builders, the latest price rise has added $18,600 more to the cost of a new home. A new multi-family home costs an average of $7,300 more, which means households pay $67 more per month to rent a brand new apartment. 

These average increases in home prices were calculated by NAHB based upon the amount of softwood lumber used to build a new home. This was gathered from the Builder Practices Survey, which was conducted by Home Innovation Research Labs.

David Logan, Director of Tax and Trade Analysis at NAHB, stated that “With an historically low level overall housing inventory, solid demand due to low interest rates on mortgages and favorable demographics,” new construction was unable to increase the supply of homes, leading to unsustainable increases in home prices. 

While there may be many causes of inflation, the main reason is that sawmills are unable to meet demand. The sawmill production dropped during the pandemic, and although it has seen some improvement it still faces labor shortages. The increase in housing starts is significantly outpacing sawmill output. 

Inflating lumber prices are also caused by ongoing supply chain disruptions, tariffs for Canadian lumber imports, and an unusually high wildfire season in British Columbia and the American West.