Lumber prices fall as the Fed battles inflation

Yahoo Finance Live anchors break down the chart of the day.

Video Transcript

BRIAN CHEUNG: (SINGING) It's going down. I'm yelling timber! I'm talking, of course, about lumber prices, you can see right now about $674 per 1,000 board feet. Prices were on the rise, as you could see on this three-year chart, through the end of last year into this year, but falling again now in March, Akiko. I don't know if you got-- did you get that Kesha reference that I just made?

AKIKO FUJITA: I didn't. I didn't, yeah.

BRIAN CHEUNG: OK, all right. Well, then, that really [INAUDIBLE].

AKIKO FUJITA: I would have sung along.

BRIAN CHEUNG: The point is still salient, though. Lumber prices are going down.

AKIKO FUJITA: How much of this is about oversupply?

BRIAN CHEUNG: I think a lot of this is actually about the Federal Reserve. And you see that the timing of the decline in lumber futures was really around the time that the Federal Reserve started raising interest rates. So obviously, the immediate impact of that was 30-year mortgage rates going up. So you had homebuilders saying, you know what? Maybe let's kind of take our foot off the gas. Buyers just certainly weren't as aggressive when it comes to lumber itself. And then you also kind of combine some of that with the fact that the inventory has been stacking up. Kind of similar story with the retailers. They have a lot of lumber, so you just don't need to chop down as many trees at that point.

AKIKO FUJITA: Yeah, I'm thinking back to the conversation we were having during the pandemic, right? How prices were going up, how challenging it was to get a hold of all the supplies. And then here we are, to your point, a story we've heard in so many different sectors, which is oversupply, inventory stacking up, not necessarily having a place for it to all go.

BRIAN CHEUNG: Well, you do wonder now, though. I mean, we were talking about this, as I think it was our chart of the day on Friday, mortgage rates actually declining for two weeks in a row. Again, it's still relatively high compared to where we were during the pandemic at around 5.1%. But you wonder if some of the steam going out of the mortgage rates will incentivize perhaps homebuilders to get back to it because I mean, housing supply is still a broad issue across the board. I mean, home prices for anyone that's tried to buy a home, they all know that it's still very expensive.

But as far as lumber itself-- and I understand that's not all necessarily homebuilders, but a massive part of it-- that's definitely going to be a big story as well. So I don't know. We'll see if it continues to go down. But although they said that there's a floor perhaps to the prices because there were some wildfires, floods in Canada, one of the major producers of lumber. So perhaps, actually, that restrains a little bit of the supply going forward.