Lumber Prices Hover Near Nine-Month Low as U.S. Mortgage Rates Top 7%

MONTREAL (Scrap Monster): Lumber prices remained close to a nine-month low as elevated borrowing costs continued to pressure U.S. housing demand, offsetting some support from stronger single-family construction and changing Canada-U.S. lumber trade flows.

The benchmark lumber price fell to approximately $529 per thousand board feet on September 24, extending a sharp September retreat.

At the same time, the average U.S. 30-year fixed mortgage rate climbed above the closely watched 7% level, increasing financing costs for prospective homebuyers.

U.S. Mortgage Rates Rise Above 7%

Freddie Mac reported that the average 30-year fixed-rate mortgage reached 7.03% as of September 24, up from 6.95% the previous week.

A year earlier, the comparable mortgage rate averaged 6.30%.

The 15-year fixed mortgage rate also increased, reaching 6.42% from 6.26% a week earlier.

While 7% is not an economic threshold in itself, crossing that level is closely watched in the housing market because higher monthly payments can reduce affordability and limit the number of buyers able or willing to enter the market.

Lumber Prices Remain Near Nine-Month Low

Lumber prices fell to approximately $528.96 per thousand board feet on September 24, according to Trading Economics, keeping the commodity near its lowest level in nine months.

The nearby November CME lumber futures contract closed at approximately $536 per thousand board feet on September 24.

The weakness follows a sharp decline during September as higher borrowing costs and uncertainty over the housing outlook weighed on expectations for construction-related lumber consumption.

Single-Family Housing Starts Jump 7.6%

Housing construction provided one important counterweight to the bearish demand picture.

U.S. Census Bureau data showed that single-family housing starts increased 7.6% in August to a seasonally adjusted annual rate of 918,000 units, up from a revised 853,000 in July.

Single-family construction is particularly important for lumber consumption because detached homes generally require significantly more framing lumber and structural wood products than multifamily developments.

But Broader Housing Data Remains Mixed

The stronger single-family starts figure does not indicate that the entire housing market accelerated in August.

Total privately owned housing starts fell 2.6% from July to an annual rate of 1.275 million units.

Building permits also weakened. Total permits declined 2.7%, while permits for single-family homes fell 1.8% to an annualized 878,000 units.

The split between stronger current construction and weaker permitting leaves lumber producers and traders with a mixed demand signal heading into the final months of the year.

Canada Adds 25% Lumber and 50% Plywood Counter-Tariffs

Cross-border trade policy is providing another important influence on the lumber market.

Canada introduced new counter-tariffs effective September 8 covering selected U.S. products in response to U.S. tariff measures.

The official Canadian tariff schedule applies a 25% counter-tariff to specified U.S. coniferous lumber products, including several pine, fir, spruce, SPF and Hem-fir classifications.

Listed plywood and related laminated wood products are subject to a 50% counter-tariff.

The distinction is important: the measures are based on specific customs classifications rather than a blanket tariff applying identically to every lumber or wood product moving between the two countries.

Canada's Public Forest System Remains Part of Long-Running Trade Dispute

Forest ownership and timber-pricing systems have long been a point of disagreement in U.S.-Canada lumber trade relations.

Natural Resources Canada says approximately 94% of Canada's forest land is publicly owned, with provincial and territorial governments managing about 90% and the federal government managing another 4%.

U.S. forestry interests have historically argued that Canada's public timber system can provide Canadian producers with an unfair pricing advantage.

Canada disputes that interpretation and maintains that its forestry system is governed by provincial and territorial laws, timber agreements, royalties and sustainable forest-management requirements.

Market Read

The near-term lumber market is being pulled in opposite directions.

Demand remains the principal headwind. Mortgage rates above 7% make home purchases more expensive and can eventually translate into weaker construction demand if builders respond to slower sales or deteriorating affordability.

August's 7.6% increase in single-family starts is supportive for current lumber consumption, but declining permits leave uncertainty over whether that pace can be maintained.

On the supply side, Canada-U.S. tariffs introduce additional uncertainty into a highly integrated North American lumber market and could affect trade flows, regional availability and delivered wood costs.

For lumber producers, dealers and building-material buyers, the key indicators to watch are mortgage rates, single-family permits and starts, builder activity and any additional changes to cross-border tariff treatment.

Courtesy: TradingView