Lumber prices fell to a new 2022 low on Thursday after existing home sales showed a slowdown in April.Lumber futures fell as much as 6% to below $700 per thousand board feet, according to data from Finviz. Existing home sales fell for a third straight month in April to its lowest level since the start of the pandemic as supply remains constrained. Loading Something is loading.
Lumber prices fell to a new 2022 low on Thursday after existing home sales data showed a continued slowdown in the housing market.
Lumber futures fell as much as 6% to below $700 per thousand board feet, its lowest level since November according to data from Finviz. The weakness in lumber can be attributed to a sharp rise in mortgage rates, which remain above 5% and have led to a slowdown in demand for homes from buyers.
April existing home sales fell for the third straight month, dropping 2.4% from March levels, and down 5.9% from a year ago to a seasonally adjusted annual rate of 5.61 million. Due to the drop in demand, inventory of unsold existing homes climbed to 1.03 million by the end of April.
But while supply of homes is slowly on the rise, home prices are still moving higher, albeit at a slowing pace. The median existing home sale price increased 14.8% year-over-year to $391,200, according to data from the National Association of Realtors.
“Higher home prices and sharply higher mortgage rates have reduced buyer activity. It looks like more declines are imminent in the upcoming months, and we’ll likely return to the pre-pandemic home sales activity after the remarkable surge over the past two years,” said Lawrence Yun, NAR’s chief economist.
First home buyers represented the largest share of home transactions in April, at 28%. All-cash sales accounted for 26% of home transactions last month, while individual investors or second-home buyers purchased 17% of the homes, according to data from NAR.
The surge in mortgage rates and tight housing market supply is putting overall pressure on the essential building commodity that typically sees a seasonal boost during this time of the year. But recent comments from a home builder survey showed that demand could continue to fall for homes, and therefore lumber, as homebuyers have trouble stomaching such high mortgage rates.
The average 30-year fixed mortgage rate fell to 5.25% from 5.30% this week, according to data from Freddie Mac.
“Traffic has been cut in half since the hike in rates,” one homebuilder in San Antonio said in a survey earlier this month. Another homebuilder in San Bernardino said, “Cancellations are starting to creep up due to loan declines and job losses. Waiting lists are certainly smaller. Saw an immediate change in buyer behavior when rates climbed over 5%.”
As long as mortgage rates stay elevated and the economy continues to show signs of slowing, it will be tough for lumber prices to reclaim the highs seen in 2021.
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