The real reason lumber prices are so high
Tony Nye - OSU Extension
Since early 2020, the COVID-19 pandemic has wreaked havoc with all of us in so many ways. The havoc has not only included the fear of the virus, but has included just about everything we do and use in our daily lives.
Shortages of this, and high prices for that have driven many of us to the brink of craziness. At times, I wonder if and/or when things that we are accustomed to will ever get back to normal. I’m thinking that since toilet paper is in good supply other things will get back to normal eventually.
By Brent Sohngen, Professor Environmental and Natural Resource Economics, The Ohio State University
In case you haven’t noticed, lumber prices have increased a lot over the last year. Based on the U.S. 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.