Cost of lumber is rising

The cost of framing lumber as measured by Random lengths composite index is showing an upward trend in July after dropping for two consecutive months starting in April.   The upturn in framing prices seems to correlate with the uptick in housing starts in July.   It makes sense that lumber prices would track with housing starts, but there are more variables in the equation than just housing starts.   Timber prices can be affected by other factors such as china importing and the supply system.   Historically the timber supply chain has not always been in sync with the demand as last year saw mill companies were hesitant to increase capacity.   2013 saw some major increases in capacity and along with that capacity increase we saw lumber prices stabilize.

The chart below compares timber framing prices to housing starts.   The housing start data comes from the census.gov site.  The timber prices are the average monthly framing lumber composite price compiled by Random lengths.
Lumber prices versus housing starts

The chart above shows that housing starts have trended upward since July 2012 until April 2013 and then dropped in May and June.   The framing lumber prices show the exact same trend with steady increases from July 2012 to April 2013 and dropping in May and June.  Just as housing starts show an increase from June to July, the composite price also increased.

Framing prices are not completely related to Packnet’s supply as only a small percentage of wood packaging materials would be classified as framing lumber, but different wood types tend to trend the same.   Also Packnet negotiates longer term contracts with supplies so it does not experience the same level of fluctuation.