Lumber prices jump after US housing starts unexpectedly soar more than 20% in May

A surprise surge in US housing starts in May helped push lumber prices higher on Tuesday as demand for the essential building commodity enters its busiest time of the year.

US housing starts, which refers to the groundbreaking of a new home’s foundation, soared 21.7% to 1.63 million units last month, which was well ahead of economist estimates.

The surprise surge represented the biggest unit increase since January 1990 and the largest percentage gain since October 2016. The surge comes as home builders rush to meet the growing demand of millennial first-time home buyers.

Lumber prices jumped as much as 3% to $540 per thousand board feet on Tuesday. Prices remain well below the all-time high of $1,700 in May 2021.

“Limited existing inventory combined with solid demand and improving supply chains helped push single-family starts to an 11-month high in May,” the National Association of Home Builders said.

The data was somewhat surprising given that mortgage rates are still well above 6%, which has significantly decreased the affordability for home buyers.

Still, building permits also increased in May, backing up the strong data on housing starts and signaling that high interest rates are being tolerated by potential home buyers.

“Despite elevated interest rates that make the cost of housing more expensive, the lack of existing home inventory in most markets is leading to increased demand for new construction,” NAHB Chairman Alicia Huey said.

And according to NAHB chief economist Robert Dietz, the recent housing starts data suggests that a bottom is forming in single-family residential construction. He noted that despite the recent surge, single-family housing starts are still down 24% on a year-to-date basis.

Dietz also highlighted that the surge in housing starts could ultimately help lower inflation, which would give the Federal Reserve more breathing room in terms of pausing its interest rate hikes.

“Additional housing supply is good news for inflation data, because more inventory will help reduce shelter inflation, which is now a leading source of growth for the CPI,” he said.

Much of the strength in the May housing starts data came in the South, Midwest and West, while the Northeast region experienced a 19% decline.


Good to see lumber back in the news!


Agreed… Glad to hear that!!!