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Lumber prices shed as much as 5 percent on 5 August, sinking to $474 per thousand board feet, reflecting the slowdown in the U.S. housing market, CNBC reported.
After peaking above $1,000 in May 2021, lumber prices are down about 70 percent since then, giving up 56 percent so far in 2022.
In June, monthly U.S. home sales fell to their lowest number since April 2020, when the COVID War was getting underway.
The housing market tends to rise and fall inversely with interest rates.
As a result, mortgage rates will continue to rise as the U.S. Federal Reserve lifts its key interest rates, stifling demand for new homes.
With home sales slowing and lumber prices falling, more potential homeowners are likely to be able to find their way to owning homes of their own, CNBC noted.
TREND FORECAST: As we noted in “Lumber Prices Add $36,000 to Cost of New Home” (4 May 2021), housing prices rise and fall with those of lumber.
However, lumber’s price plunge will not send the price of new homes down by a proportionate amount.
A key reason: land for building new houses in primary areas is increasingly scarce, keeping lot prices high.
While the price of new homes will rise more slowly and eventually ease downward, prices will not return to pre-COVID levels except in backwater markets or unless there is a catastrophic economic crash.