What’s Going on with Lumber Prices?

By: Brent Sohngen, Professor Environmental and Natural Resource Economics.

This article was originally published at: https://u.osu.edu/aede/2021/05/08/whats-going-on-with-lumber-prices/

In case you haven’t noticed, lumber prices have increased a lot over the last year.  Based on the US Bureau of Labor Statistics Lumber Price Index, which you can find here, lumber prices have increased 180% since April, 2020.  This increase started last fall, and has continued ever since. So, why have they risen, and how high will they go?

Let’s start with the first question, why have they risen?  The economic explanation is relatively straightforward: Demand rose rapidly due to pandemic related building, and supply is really inelastic, as we say in economics.  Thus, while the demand of wood has increased dramatically, the supply of wood hasn’t been able to keep up.  Let’s break this down. Continue reading