Lumber Prices in 2024: What Happened and Why (Analysis)

What’s behind the dramatic 75% drop in lumber prices since their 2021 peak? How will these price changes affect homeowners and builders in the coming months?

The lumber market has experienced unprecedented shifts, from pandemic-driven highs to record lows in 2024. These fluctuations have forced sawmills to adapt, created opportunities for buyers, and reshaped the construction industry landscape.

Keep reading to understand what happened with lumber prices in 2024 and what these changes mean for your next building project and the market as a whole.

Lumber Prices in 2024

A rough year for lumber prices, 2024 saw record lows driven by weak housing demand amid high borrowing costs. The market saw lumber prices fall 75% from their 2021 peak. This downturn created an oversupply, forcing sawmills to cut production or close. While prices are expected to remain low in the short term, experts anticipate future increases based on economic conditions and industry adaptations. This roller-coaster shift from pandemic highs to historic lows presents both challenges and opportunities for builders.

We’ll explore what’s driving the recent drop in lumber prices, how builders are adapting to price fluctuations, what the future might hold for lumber prices—and how this could affect homeowners, builders, and the broader construction industry.

The 2024 Drop in Lumber Prices

Lumber prices plummeted nearly 14% in 2024, hitting a record low of $440 per thousand board feet in July. This decline continued a downward trend, with prices remaining under $400 per thousand board feet for over three months—the longest period at this level since 2019. 

The current downturn contrasts with recent history. In May 2021, lumber prices had soared to an unprecedented $1,514 per thousand board feet, driven by pandemic-related demand for new homes and renovations, supply chain disruptions, and limited sawmill capacity.

(Shortform note: In their book COVID-19, Klaus Schwab and Thierry Malleret explain that, in response to recent supply chain disruptions, companies are rebuilding their logistics networks with a focus on reliability rather than maximum efficiency. The COVID-19 pandemic revealed how vulnerable just-in-time delivery systems can be when global supply chains are disrupted. To better protect themselves, businesses are now taking two key steps: spreading their risk across multiple suppliers and creating backup plans. The goal is to build supply networks that can better withstand future crises.)

The recent lumber price collapse—a 75% drop from its peak, has caught many in the industry off guard. At the beginning of 2024, brokers were optimistic, anticipating strong demand for new housing in the US market. Instead, demand was weaker than expected. By mid-July, the market had seen five straight weeks of falling predictions for future lumber prices.

The plunging prices have created an oversupply of lumber and forced some sawmills to cut back production or close.

Causes of the Lumber Price Decline

Several key factors have converged to drive down lumber prices, each with its own impact on the housing market and construction industry:

• Interest rate increases. Federal Reserve interest rate hikes, aimed at cooling the housing market, have made borrowing more expensive, dampening housing market activity, reducing overall spending, and curbing lumber demand.
• Weakened construction and renovation demand. High mortgage rates and elevated home prices have curtailed new home sales, building activity, and home improvements. This broad decline is reflected in major retailers such as Home Depot reporting a 3.2% drop in US sales. Consequently, lumber prices have fallen 24% since mid-March 2024.
• Oversupply issues. A mismatch between supply and demand has flooded the lumber market. High inventory levels, stemming from early-year optimism, coupled with ongoing high production, are driving lumber prices even lower. This oversupply is partly due to a “bullwhip” effect: In response to high prices in 2021 and 2022, lumber producers increased their capacity. However, this new supply is hitting the market just as demand has weakened, worsening the oversupply problem.

Consequences of the Lumber Price Decline

Tumbling lumber prices have exacerbated problems across the housing market, construction industry, and timber production sector:

• Decline in construction activity. Building permits and housing starts fell 6% and 4%, respectively, in May 2024, reaching lows not seen since the start of the pandemic.
• Challenges in the repair and remodeling market. High borrowing costs have led to less activity in the repair and remodeling market, which consumes about 40% of all lumber. 
• Sawmill closures. Sawmills, facing financial challenges as lumber prices decline, have been forced to curtail production or shut down to balance lumber supply with weakened demand from the construction and home-improvement markets.

What’s Next

While lumber prices were expected to remain low through the end of the third quarter of 2024, some experts anticipated potential increases beyond that. In the short term, Domain Timber Advisors predicted a slight uptick in prices in the latter half of the year, ranging from the high $400s to mid-$500s per thousand board feet. Some analysts anticipated lumber prices would climb back to the $500 to $600 range per thousand board feet by 2025, if sawmills cut production and housing demand perks up. As of January 6, 2025, the price was $575.50 per thousand board feet.

In response to current market conditions, builders are offering discounts and incentives to boost sales. Industry experts suggest that now might be an opportune time for consumers and contractors to purchase lumber for future projects, taking advantage of lower lumber costs.

A potential short-term increase in home-building activity stimulated by lower prices and builder incentives could help stabilize the market. However, the industry faces a delicate balance in the future:

• As the Federal Reserve cuts interest rates, lumber prices are likely to rise, potentially rejuvenating the repair and remodeling market and improving existing sawmills’ stability and profitability.
• If low lumber prices persist, more sawmills might be forced to close—which could result in lumber prices rebounding by aligning supply more closely with current demand levels.

Though these factors suggest that lumber prices might stabilize or modestly increase in the coming months, the exact trajectory will depend on broader economic conditions and how the industry adapts to current challenges.

(Shortform note: In Narrative Economics, Robert J. Shiller argues economists must look beyond quantitative methods to understand how emotions and narratives shape economic decisions. He recommends qualitative research—including interviews, focus groups, and longitudinal studies—while collaborating with psychologists and sociologists. Economists should also analyze diverse sources like social media, advertisements, and historical documents to understand how people engage with economic concepts. This approach acknowledges that traditional economic data sources are relatively recent and tell only part of the story.)

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