In today’s construction news, read about the week-to-week framing lumber composite price, which jumped 1.8% on Feb. 28, 2025, climbing to $461 per 1,000 board feet. Lumber prices are currently 14.4% higher than they were one year ago. Meanwhile, U.S. construction spending unexpectedly dipped in January, dragged down by a decline in outlays on multi-family homebuilding. Following an unrevised 0.5% increase in December, the Census Bureau of the Commerce Department said on Monday that construction spending had decreased by 0.2%. Reuters polled economists who predicted little change in building spending. In January, construction expenditures rose 3.3% year over year.
Lumber Costs for Framing
Original Source: Framing Lumber Prices
On Feb. 28, 2025, the weekly framing lumber composite price rose 1.8% to $461 per 1,000 board feet. Lumber costs are 14.4% higher than a year ago.
NAHB tracks lumber pricing and futures prices and analyzes the U.S. framing lumber market. Weekly data is obtained from the Random Lengths framing lumber composite pricing, which includes prices from the highest-volume U.S. and Canadian locations. Other wood pricing, including plywood, are shown below.
U.S. Framing Lumber Market Prices and Trends Weekly summary of lumber and plywood prices ending Feb. 28, 2025:
The Random Lengths framing lumber composite price rose 1.8% (+14.4% YoY).
Lumber futures fell 0.8% (+11.5% YoY).
Prices are 7.3% higher than a month ago.
The structural panel composite price rose 0.4% week-over-week.
Prices fell 0.5% for OSBs.
Flat Western Fir plywood pricing.
Southern Yellow Pine plywood rose 0.9%.
Significant Lumber Price Growth in 2024
Most 2024 lumber price growth occurred in 2×10. Western SPF 2×10 rose 63.2% and Green Douglas fir 53.6%, except for 2×10 SYP (down 3.7%).
The February sixth annual review of Canadian softwood lumber levies was delayed by the Department of Commerce. Canadian softwood lumber tariff rates were delayed by up to 90 days. This rate is 14.5% but anticipated to double.
North American lumber markets will monitor supplies more in 2025. January will permanently implement some of 2024’s major mill curtailments and closures.
Important Canadian Sawmill Cutback
Western Forest Products Inc. cut British Columbia sawmill production by 30 million board feet from October to December 2024. The company cited sluggish lumber demand and increasing U.S. softwood lumber duty rates.
Western’s CEO Steven Hofer: “With the potential for the combined U.S. Softwood lumber duties rate to more than double in the second half of 2025, all levels of government need to be focused on creating a policy environment that supports the forestry industry and encourages domestic investment.”
Fastmarkets/RISI predicted 2024 sawmill closures affected North American softwood lumber production by 3.1 billion board feet. Western Canada has seen many curtailments.
Notable Sawmill Closures and Market Effects
In late 2024, Canfor Corp., the fourth largest softwood lumber producer in North America, closed two British Columbia mills and reduced southern U.S. production.
The sluggish lumber market and higher U.S. tariffs on Canadian softwood lumber caused mill closures and curtailments, the business said.
Closures reduced annual production by 670 million board feet.
Key Lumber Price Factors
Increased demand, rising tariffs, supply-chain constraints, and insufficient domestic production have made softwood lumber prices unpredictable in recent years. NAHB suggests several solutions to high lumber prices:
Negotiate a long-term tariff reduction and lumber import pact with Canada.
Target increased wood sales from publicly-owned lands and open more federal forest lands for harvesting to boost domestic production.
Export less U.S. lumber to China and other countries.
Find new markets to lessen our dependency on Canadian lumber imports and make up the domestic shortage.
Find new markets (besides Canada) and collaborate with softwood lumber exporters to boost US exports.
Wood and Lumber Prices and New Home Cost
Besides frame timber, plywood, OSB, particleboard, fiberboard, shakes, and shingles make up a large component of a new home’s materials and cost.
The average new single-family home uses 2,200 square feet of softwood plywood, 6,800 square feet of OSB, and 15,000 board feet of framing lumber, according to Home Innovation Research Labs surveys. Homebuilding products like cabinets, windows, doors, and trusses require softwood lumber.
According to the IRS Returns of Active Corporations tables, sawmill prices for the lumber used in these items are marked up by the percent difference between receipts and cost of goods in the “wood product manufacturing” industry to account for the manufacturer’s profit.
Due to construction loan interest, brokers’ fees, and margins needed to attract capital and underwrite loans, home purchasers pay more. According to NAHB’s regulatory cost analysis, the final home price will be roughly 15% higher than the builder’s cost for construction elements.
Bottom line: softwood lumber prices affect new home costs. Increasing construction worker wages and interest rates are contributing to the housing market’s affordability crisis.
When Do Builders Get Cheaper Lumber?
Homebuilders and remodelers enjoy pricing relief when mill prices drop significantly and/or stabilize. Note that substantial price drops may not suffice. Prices must fall long enough to lower a supplier’s average expenses following a run-up.
The amount and consistency of price drops and if prices have stabilized at the reduced level may take builders weeks to months to get price relief on the order first recorded in lumber futures or cash markets.
This “waiting period” for lumber price decreases depends on builder size, supplier size, and builder-supplier relationship. Residential construction firms’ buying power and suppliers’ selling power are strongly connected with size. The buyer-seller market power gap determines how quickly decreased prices reach customers.
Why Do Builders’ Lumber Costs Rise Rapidly with Market Prices?
When market prices rise, builders receive higher prices faster than when values fall. Builders’ lumber costs may rise alongside mill prices due to the same causes that caused big lags on the way down.
Wholesalers are “trigger happy” when prices soar. Their inventory is cheap compared to cash pricing during these periods, thus they quote at or near market prices. Wholesalers can buy low and sell high.
Wholesalers acquire lumber based on how long a bull market will persist because they cannot forecast its termination. As consumers have varied forecasts, purchase behavior can vary. A wholesaler who expects timber prices to rise for two months will acquire more inventory than one expecting a two-week run.
Retailers have less buying power than wholesalers. Retailers (like lumberyards) are called “price takers.” Thus, inventory costs rise with market prices.
Builders pay these additional costs to maintain operational margins. This is why lumber retailers make less money when prices rise than wholesalers.
Surprising Drop in US Construction Spending in January
Original Source: US construction spending unexpectedly declines in January
US construction investment unexpectedly decreased in January due to a drop in multi-family homebuilding.
The Commerce Department’s Census Bureau reported Monday that construction spending fell 0.2% following an unrevised 0.5% increase in December. Reuters economists predicted construction spending to remain flat. January construction spending rose 3.3% year-over-year.
Private construction spending fell 0.2%. Residential construction investment fell 0.4%, whereas single-family projects gained 0.6%.
Higher mortgage rates are a constraint, and lumber and appliance tariffs could compound the issue. Due to low demand, there are too many unsold homes.
President Donald Trump has authorized a fresh trade inquiry that could add tariffs on imported lumber to Canadian softwood timber and 25% tariffs on all Canadian and Mexican goods due Tuesday.
Multifamily housing spending fell 0.7% in January. Home renovation spending rose.
January saw little change in office and factory investment.
Public construction spending rose 0.1%. Federal spending rose 3.2% while state and local spending fell 0.1%.
Summary of today’s construction news
In summary, to keep operating margins favorable, builders are charged for these increased expenses. Wholesalers are therefore more likely than lumber merchants to make significant profits during periods of rising prices. Wholesalers are unable to forecast the conclusion of a bull market and purchase lumber based on their assessment of its likelihood of duration. Disparities in purchase behavior may occur because different buyers may have different projections. A wholesaler who anticipates a two-month increase in lumber prices will purchase more inventory than one who anticipates a two-week run. In general, wholesalers have more selling power than retailers do. The retailer (such as a lumberyard) is referred to as a “price taker” in this situation. Therefore, their inventory costs typically rise in tandem with market prices.
Meanwhile, in the month of January, expenditures on multi-family dwelling units decreased by 0.7%. Expenditures on house improvements continued to grow year after year. In the month of January, there was no change in the amount of money invested in private non-residential constructions such as factories and offices. An increase of 0.1% was seen in expenditures for public construction projects. The expenditures of state and municipal governments decreased by 0.1%, while the expenditures on projects funded by the federal government increased by 3.2%.
