As we head into 2025, many are wondering: will lumber prices go down, or will building costs stay higher than we’d like?
Even though the pandemic feels like a thing of the past, its effects are still lingering, especially in construction. Lumber prices have come a long way since their record-breaking highs in 2021, but they’re still nowhere near what they used to be before COVID.
For anyone planning to build a custom home, that’s a big deal.
Heading into a new year, challenges like labor shortages, supply chain snafus, and steady demand for new materials are keeping costs unpredictable. Dealers and future homeowners alike are keeping a close eye on what’s next for lumber prices in 2025
What Happened to Lumber Prices?
First, a recap.
Beginning in 2020 and running through 2022, lumber prices were characterized by two things: being high and fluctuating. The simple explanation for both was the pandemic and its effects on global commerce, including:
- Reduced lumber production
- A housing boom
- Supply chain disruption
1. Reduced Lumber Production
Once the pandemic hit, entire supply chains were crippled. Raw materials of all sorts became harder to come by – lumber included.
Across the country, logging operations and sawmills were shut down or drastically reduced operations for many months, creating a lumber shortage. Imported lumber and timber that supplemented domestic production became hard to come by as international trade came to a near-standstill.
The laws of supply and demand kicked into high gear. With an imbalance of available lumber against consumer demand, lumber prices skyrocketed. Lumber price charts show prices spiking by about 280%, or more than doubling with prices peaking at $1,418 per thousand board feet in May 2021.
2. A Housing Boom
The pandemic housing boom compounded matters more. Throughout 2020 and 2021, the real estate market was a seller’s dream. Many who lived in crowded urban areas looked to leave while existing homeowners found they needed bigger spaces. With a limited inventory of homes for sale, house prices skyrocketed.
Those who turned to new construction for their next home found themselves competing for a limited supply of building materials.
3. Supply Chain Disruption
Though lumber production had mostly resumed both domestically and abroad, the supporting supply chain never fully recovered.
Both in the U.S. and internationally, ports and delivery services found themselves short-staffed or still operating under restrictive public health guidelines. With limited workers, the ability to process goods at pre-pandemic level was nearly impossible. Shipping prices – from container costs to transit expenses – increased to make up for budget shortfalls.
Compounding matters more – consumer demand hasn’t let up either. Again, the laws of supply and demand apply, keeping prices well above where they were before the pandemic (more in this in a minute).
Timber! Will Down Go Lumber Prices in 2025?
What’s next for lumber prices in 2025?
Lumber prices remain well below the pandemic peaks but are unlikely to return to pre-pandemic levels.
As of late 2024, prices climbed to $610 per thousand board feet, reflecting a steady demand and ongoing supply constraints. The National Association of Home Builders (NAHB) reported that the framing lumber composite price increased by 2.9% for the week ending November 1, 2024 – the fifth consecutive weekly increase. Lumber prices are now 17.2% higher than they were at the same time last year.
Looking ahead to 2025, market analysts forecast an 11% rise in housing construction as builders address the housing shortage. This growing demand is expected to drive lumber prices higher throughout the year.
Increased Demand for New Homes
The housing market continues to face significant demand pressures.
Zillow’s 2024 analysis highlighted a shortfall of 4.5 million homes, an increase from the 4.3 million deficit reported in 2023. While multi-family housing developments have helped alleviate some pressure, the inventory gap remains substantial.
With housing inventory still falling short of demand, new construction remains a priority.
But what’s keeping lumber prices higher than what was considered “normal” increases year-over-year for decades? Several of the same factors that drove them up to begin with.
- Reduced lumber production: In British Columbia, a major global timber supplier, lumber production remains constrained. Wildfires in 2023 damaged approximately 1.4 million hectares of forested land, reducing the availability of harvestable timber and creating long-term supply challenges. Government regulations focused on sustainability also limit output, affecting North American markets.
- Labor shortages: The labor pool remains tight, and the lumber industry is no exception. With fewer workers available for harvesting, processing, and transportation, production costs are higher. This shortage affects everything from the raw material supply to the final delivery of lumber.
- Supply chain logistics: Supply chain disruptions continue to challenge the market. In 2025, vulnerabilities related to labor shortages, geopolitical tensions, and cyberattacks are expected to create further complications. Rising shipping costs and delays in transportation add to the uncertainty surrounding material availability.
Reduce the Impact of Lumber Prices Regardless of World Events
While there’s no way to insulate an industry from the effects of a global event, there are ways to reduce their impacts. For custom home builders, partnering with a building materials supplier that has an established network and efficient construction method brings some stability to materials costs.
Affiliating With a Building Materials Supplier
Why does partnering with a building materials supplier help mitigate costs?
Strength in numbers.
With a collective of construction companies working through a single source, purchases of commodities such as lumber are made in bulk.
Like prices going up because of a limited supply trying to meet increased demand, bulk purchases take on the laws of economics in a different way. Items bought in smaller quantities require more resources – whether it’s manpower or packaging materials – to make their way from the manufacturer to your doorstep.
Purchasing items in large orders drives down the cost per unit – even if it’s by a few pennies – as there’s ultimately less work and other materials, such as packaging, involved. In bulk purchases, pennies saved add up quickly to a noticeably lower price.
Home Construction That’s Efficient
Another way custom home builders can control construction costs is by building homes using a process rooted in efficiency. Panelized construction is designed to do just that.
Through panelized construction, a home’s wall panels and other structural components are built off-site in a factory. In creating the parts of a home in a factory setting, there are controls over the amount of materials used and how far they go.
Materials are ordered in exact quantities and assembled to specific measurements, eliminating waste. In other words, there isn’t much useless scrap left over from that bulk order of lumber. The client only pays for the materials actually needed to create their next home.
Once delivered to the construction site, a panelized home goes up quickly, with no need for additional materials to assemble it.
Create Some Immunity to Lumber Price Spikes
While there’s no way to predict the impact an event will have on lumber prices and home construction costs, there are two important steps your home building company can take to shelter itself.
Aligning your home building company with an established material supply increases value for you and your customer. And using an efficient building method ensures you’re not using more than you have to.
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This article was published in July of 2021 and was recently updated to reflect current industry trends.
