Soaring lumber prices are holding back a U.S. housing market.
The number of building permits issued in March rose 2.7% month over month to a seasonally adjusted annualized rate of 1.766 million. The uptick is a mere blip on the radar compared with the 19.4% increase in housing starts, which grew at their fastest pace in nearly 16 years. Typically, building begins within two months of issuance, according to the National Association of Home Builders.
Some developers have “held back on projects on the expectation that prices will soon fall back,” wrote Matthew Pointon, senior property economist at the research firm Capital Economics.
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Front-month lumber futures traded at CME Group have climbed 47% this year to $1,286 per thousand board feet. Prices are up 395% from their April 2020 pandemic low of below $260.