Supply chains are finally clearing out high-priced stock, which means cheaper lumber is finally in the sales channel for use by consumers and builders

If you’ve paid even cursory attention to the housing market, you know skyrocketing lumber prices have been a hot topic for everyone from home builders to do-it-yourselfers since the summer of 2020.

There’s been story after story after story detailing the reasons behind the rapid rise of the building commodity. The TL;DR version is that lumber producers clamped down on production at the start of the COVID pandemic anticipating the demand for wood would shrink like George Costanza’s jumble-giblets after a dip in the swimming pool. What actually happened, though, was that consumers found themselves with lots of time on their hands due to newly imposed pandemic lockdowns, and they used that time to make home improvements. Additionally, builders continued plowing ahead with new construction fueled by high demand from millennials entering prime home-buying age and record-low interest rates.

Instead of shrinking, demand soared, and with new supply limited, prices for lumber roared to an all-time high of $1,670.50 per thousand board feet on May 7 of this year.

Since then, however, prices have fallen off a cliff as producers have boosted production and opened new sawmills in the southern U.S. where lumber is plentiful and production costs are low. Prices are down 70% from their highs falling to $564.50 per thousand board feet on August 5.

All of this meant very little in terms of lowering the retail cost because there was still lots of expensive lumber – purchased before prices started falling – in store inventories. But now, that expensive lumber has cleared the sales channels and consumers and builders have ready access to less expensive lumber that’s now flooding supply chains.

Lumber producers who just reported record Q2 profits have issued guidance that analysts shouldn’t expect more of the same for Q3 and beyond because of the lower lumber futures prices. In fact, many industry observers are worried about an oversupply problem. They say lumber producers have used all that cash they’ve been swimming in to expand production too far.

While that could be bad news for commodities investors, it’s most definitely welcome news for home buyers and builders who can expect to pay a lot less for lumber.