As we move through October 2024 and start looking ahead to 2025, lumber prices remain a hot topic, especially if you’re in construction, manufacturing, or real estate. After the wild price swings during the pandemic, things have calmed down somewhat, but lumber prices are still sensitive to changes in both global and local markets. Let’s take a look at what’s happening with lumber prices in 2024-2025, how lumber price futures are shaping up, and what we can expect in the months ahead.

Where We Stand in October 2024

Prices have somewhat stabilized after the massive fluctuations we saw in 2021-2022. Lumber demand has backed off slightly in 2024. As of June, U.S. lumber consumption was down 2.9 percent compared to June 2023. With lower demand, wood prices have somewhat stabilized, but we’re still seeing elevated prices compared to pre-pandemic levels.

Now, don’t get too comfortable, though. While prices have steadied, several factors remain at play that could keep things unpredictable as we head into 2025.

Factors Driving Lumber Prices in 2024-2025

1. Housing Market Demand

Make no mistake. The elephant in the room is housing demand. This is one of the main drivers behind ongoing high prices. In the U.S., even though rising interest rates and inflation have taken the steam out of the housing market, there’s still a massive shortage of homes, especially affordable ones.  According to Forest Economic Advisors, LLC, there is an estimated shortage of 4 million homes that the country hasn’t built over the past decade.  For the first six months of 2024, single-family starts were up 16 percent, while single-family permits issued from January to June were up 13 percent compared to the same period in 2023. However, the market has been currently slowing.

And don’t forget about home renovations and repairs. While 2024 has seen an approximate 7% drop in home remodel and repair activity compared to 2023, an uptick is expected as interest rates fall. All of this keeps the pressure on lumber demand.

2. Mill Output

Even as lumber demand has softened in 2024, mill curtailments and permanent closures in the U.S. and Canada, resulting from softer prices, have helped restrict supply and keep prices up. As prices drop, some mills become unprofitable to operate, and production stops, helping to maintain prices. If market conditions improve quickly, mills may not be able to resume full production fast enough to avoid shortages and price hikes.

3. Supply Chain and Environmental Disruptions

Another reason prices stay high is that supply chain issues haven’t completely disappeared. Over the past few years, we’ve seen how events like wildfires in the Western U.S. and Canada have had a big impact on timber production. These natural disasters, along with labor shortages, have made it tough to keep up with the demand for lumber.

And it’s not just local issues; there are global factors too. For example, the ongoing conflict in Ukraine has disrupted lumber exports from Russia, which has created more demand for North American lumber. Plus, getting lumber from one place to another is still a challenge. Even though shipping has improved, there are still bottlenecks and potential disruptions, such as threats of rail and port strikes.

4. Economic Factors and Inflation

Of course, we can’t ignore the broader economic picture. Inflation and high interest rates are still driving up costs across the board. Everything is more expensive these days, from production to transportation, which affects the price of lumber.

Economists are cautiously optimistic that inflation will continue to ease through mid-2025, but how quickly that happens will have a big effect on both lumber price futures and the broader market.

Wood Price Forecast for 2025

If you’re looking for a crystal ball on where prices are headed, lumber price futures can give you some insight. These futures give businesses and investors a sense of where prices might land over the next 6 to 12 months. Right now, lumber futures suggest that we’ll continue to see some volatility but probably within a stabilized range of $500-$600 per thousand board feet. This is more in line with seasonal fluctuations than the wild pandemic swings we saw a few years ago.

As we move into 2025, analysts expect that as inflation eases and supply chains improve, lumber prices will moderate a bit. That said, housing demand is still strong, and with interest rates falling, it’s unlikely that prices will drop back to pre-pandemic levels anytime soon.

Looking ahead, the wood price forecast for 2025 is cautiously optimistic. While prices are expected to stay higher than the $300 per thousand board feet we used to see before the pandemic, the highs of 2021 aren’t expected to return either. Instead, we’ll likely see prices settle into the $500-$600 range, depending on seasonal demand and other factors like supply chain improvements and labor availability.

Conclusion: What to Expect from Lumber Prices in 2024-2025

As we head into 2025, we can expect lumber prices to stay relatively high, driven by a mix of strong housing demand, environmental disruptions, and supply chain challenges. While prices have stabilized compared to the wild swings of the past few years, they’re still higher than what we were used to before the pandemic.

If you’re trying to plan ahead, keeping an eye on lumber price futures could help you hedge against potential increases. But even with the possibility of moderation as inflation eases, we can’t ignore the ongoing risks of natural disasters, economic uncertainty, and global trade disruptions. For now, we should expect wood prices to remain somewhat stable but with a risk of volatility within the new normal of post-pandemic pricing.