(information contained in this website do not constitute investment advice, I’m not a financial professional…)
The housing market is on fire, the price of woods is crazy. What is going on and why it is impossible for the lumber price has always reached the roof. Lumber historically fluctuates between 200$ to 400$ USD/1,000 board feet express has (bd ft). Take a look at this graph, representing the price for the past 50 years. Like almost everything in finance the price is driven by supply and demand. The supply chain was clearly disrupted during the pandemic, partly because of the closing of the dryers but also of the expedition. On the demand side, the saving rates increase to increase significantly, the mortgage rates were at a record low and lots of owner made renovation for the new stay-at-home lifestyle. I personally calculate that my second home project will cost me 30 000$ more to build only for the lumber part. If the price continues to increase, maybe around the psychological barrier of 2000$/bd ft, the demand will almost disappear and the price will tank. The most important factors in Canada are in order: interest rate, re-opening and sawmill production. Those factors will influence directly the demand on the new house building project and renovations. Just so you know, a 2×4 cost around 8$ each compared to 2$ before the pandemic. I believe that this anomaly will have repercussions on the rental price soon too. We will see a pronounced drop in lumber prices within 12 to 18 months depending on the month. I even have the impression that it could fall to its historical price if people start travelling again and go back to work in the big cities.