Lumber Prices Hit Lowest Level in 2022 As High Mortgage Rates Dent Demand

  • Lumber costs fell beneath $800 on Monday to hit their lowest degree of 2022.
  • The 30% year-to-date decline in lumber costs comes as mortgage charges hit a 13-year excessive.
  • A current homebuilder survey revealed a slowdown in demand attributable to surging mortgage charges.

Lumber costs fell as a lot as 6% on Monday to hit its lowest degree up to now this 12 months, falling beneath $800 and hitting a low of $780 per thousand board ft.

The decline extends an already robust 12 months for the important constructing commodity, with lumber costs down 30% year-to-date, and down 13% over the previous week. The decline comes as mortgage charges soar to ranges not seen since 2009, elevating the price of shopping for a house within the US significantly.

The favored 30-year fastened mortgage charge hit 5.27% final week, nicely above the three.11% charge it was at first of the 12 months. That greater than 2% distinction can result in a month-to-month mortgage fee distinction of nicely over $1,500, relying on the worth of the house. 

The swift rise in mortgage charges is beginning to have a destructive affect on demand within the residence constructing market, in accordance with a current survey performed by John Burns Actual Property Consulting. That could possibly be including to the draw back stress in lumber costs.

The highest themes of the homebuilder survey have been a slowdown in entry-level housing demand attributable to “fee shock,” buyers pulling again, and a ripple impact of rising charges shifting up market, in accordance with Rick Palacios Jr., director of analysis and John Burns Actual Property Consulting.

A homebuilder in Dallas mentioned, “curiosity lists are shrinking or patrons are really pausing,” whereas a Houston homebuilder mentioned, “many first-time patrons merely now not qualify with the rise in rates of interest, as their debt-to-income ratio will get out of whack.”

“Site visitors has been lower in half for the reason that hike in charges,” one homebuilder in San Antonio opined. One other homebuilder in San Bernardino mentioned, “Cancellations are beginning to creep up attributable to mortgage declines and job losses. Ready lists are definitely smaller. Noticed an instantaneous change in purchaser conduct when charges climbed over 5%.”

The stress on lumber costs might be lengthy lasting if the housing market slows down, residence costs stay unaffordable, and on condition that the seasonal demand for lumber typically seen throughout spring constructing months is just not supporting costs up to now this 12 months. 

“We count on costs in the long run to be challenged with the affordability and rising rate of interest headwinds,” Sherwood Lumber COO Kyle Little advised Insider final month.

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