U.S. lumber prices are falling in response to a late, cold spring in some parts of the country, and to a sharp first-quarter production increase by mills that may have overestimated gains in housing starts, lumber industry participants said.
By early May, industry benchmark prices were off their highs for the year so far although much stronger than year-ago levels amid growing evidence of increasing demand for construction of single-family homes and especially multi-family buildings.
Prices may decline further before the inventory buildup is worked off but suppliers are expected to meet growing demand later in the year, resulting in prices that are likely to be little changed from current levels by the end of the year, experts said.
“We saw some over-production in the first quarter,” said Mark Jaffe, president of Friend Lumber Co., which sells to builders, home-remodelers, and private customers in Hudson, NH. “People got excited, thinking they were going to have a heck of a year with big gains in housing starts. People thought that the price was going to stay up. It’s going to take a little bit of time to work that off.”
Jaffe said his sales declined in the first quarter as bad weather in the northeast cut construction activity but he expects the second quarter will be stronger than a year earlier as housing demand picks up, especially for single-family homes, his most important market.