Lumber prices hover near recent lows as new home construction sinks and mortgage rates jump to highest since 2008

• Lumber prices remained near recent lows as construction on new homes fell while mortgage rates jumped.
• Housing starts dropped 14.4% in May from the prior month to a 1.55 million annualized rate, the lowest in more than a year.

Lumber prices remained near recent lows Friday as construction on new homes fell to the lowest in more than a year while mortgage rates hit a 14-year high.

Prices were hovering around $569 per thousand board feet, up less than 1% from Thursday, after recently dropping to their lowest point in nine months.

Lumber prices have tumbled more than 60% from highs reached in March, as the housing market cools in response to higher interest rates. On Wednesday, the Federal Reserve raised its benchmark rate 75 basis points, the largest hike since 1994, to tame skyrocketing inflation.

The rise in interest rates is a stark turnaround from recent years, when ultra-low borrowing costs spurred a spree of home buying and lending that sparked a sizzling housing market.

But an increasingly hawkish central bank has sent mortgage rates up as well, making homes less affordable and dampening demand for building materials like lumber.

The average 30-year fixed-rate mortgage climbed 25 basis points to 5.65% for the week ended June 10, the highest level since late 2008, the Mortgage Bankers Association said Wednesday. In addition, purchase applications have fallen more than 15% from a year ago.

Meanwhile, new construction is also down, with housing starts dropping 14.4% in May from the prior month to a 1.55 million annualized rate, the lowest in more than a year, the Census Bureau said Thursday. The amount of permit applications, a favored metric of future construction projects, fell to a nine-month low of 1.7 million.

Insider previously reported that 80% of buyers don't think it's a good time to buy a home in the current market. The pessimism comes as a Freddie Mac economist cautioned that the US housing market could contract as aggressively as it did in 2006.