Lumber prices just hit their lowest point in 9 months as mortgage demand sinks to levels not seen in 2 decades
Lumber pricesfell to a nine-month low on Wednesday after mortgage demand plummeted.
- Mortgage demand fell to its lowest level in 22 years as rates remain well above 5%.
- "Market drastically changed in last month. Traffic slowed significantly," an Oregon home builder said.
The orderly decline in lumber prices, which have declined in nine of the last 11 weeks, comes as mortgage demand for homes falls to its lowest level in 22 years. That weakness has been driven by a swift rise in mortgage rates, which surged above 5% for earlier this year and haven't budged lower.
A traditional 30-year fixed mortgage saw average interest rates rise to 5.4% over the past week, according to the Mortgage Bankers Association. That has translated into a drop-off in demand as the cost to buy a home has risen considerably due to the higher rates.
Mortgage applications fell 7% over the past week and are down 21% year-over-year. Meanwhile, demand for mortgage refinances dropped 6% over the past week and is down 75% year-over-year. Mortgage rates at the same time last year were in the low 3% range.
All of this demand destruction has translated into lower lumber prices as
"Market drastically changed in last month. Traffic slowed significantly. Sellers of both new and used homes are dropping prices," a home builder in Oregon said.
The slowdown in home sales could help solve an affordability crisis that has plagued the
And a slowdown in the home building market means a slowdown in the supply of new homes hitting the market, which isn't helpful for home prices.
"Some parts of town where finished homes are now taking a month to sell versus hours. Market is definitely correcting. Incentives are back and seeing some builders cutting prices on inventory," a home builder in Austin, Texas said.
One home builder in Denver summarized the driving force behind the
Lumber prices are down 50% year-to-date and have fallen 67% from their record high reached last May.
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