Demand, Lockdowns Make Wood Shortages Likely In 2021

Dec. 22, 2020 7:16 PM ETHD, LOW, TOL, WOOD, CUT19 Comments
Jason Tillberg profile picture
Jason Tillberg


  • Economic lockdowns have impacted the supply of lumber.
  • Strong demand for lumber has both increased prices and created shortages.
  • These shortages are expected to last into Q2 2021 or longer.
  • Higher lumber prices mean higher input costs impacting profits and inflation.

If there is to be an inflationary force on the horizon, it could very well come from shortages in materials and commodities. Strong price gains are particular in softwood lumber. The 3-year chart below is the price of 1000 board ft of random length softwood lumber.

If anyone went to a Lowe's (LOW) or Home Depot's (HD) lumber department over the summer, you would have noticed both the lack of lumber supply and the price increases. Standard 8ft 2 x 4's were going for over $6 when they were under $3 not that long ago.

Covid scare coupled with shelter in place orders caused a lot of lumber mills to shut down over the course of 2020 hitting lumber supply.

In today's economy, there has been a great change in demand for commodities. On one hand, gasoline demand has been hit hard. On the other hand, demand for lumber is red hot.


To best give justice to the demand for lumber, below is a chart of new home sales. Demand for single family housing outside of cities is what is driving sales.

Source: U.S. Census Bureau and U.S. Department of Housing and Urban Development, New One Family Houses Sold: United States

Homebuilder Toll Brothers (TOL) recently released earnings for the fourth quarter and provided updates on its state of business. There are a few key points worth noting from its conference call.

First, the company noted this:

In the first 6 weeks of our quarter through December 6th, our non-binding reservation deposits, which are a precursor to contracts, are up approximately 48% compared to 1 year ago.

Demand has continued to be very strong in the first quarter. In fact, this Saturday, we will raise prices nationwide for the 5th time this calendar year.

As for demand, the

This article was written by

Jason Tillberg profile picture
Maker of hardwood roll top bread boxes, self taught in economics with focus on productivity and inflation.44 years old, married, have two daughters 9 and 11, and a 3 year old son. I live upstate New York near Ithaca.My profile pic is that of Joseph, from the story from the old testament, where he is telling the Pharaoh that he will have 7 years of famine and 7 years of plenty and in order to prepare, he would need to save 20% of his surplus during the years of plenty so that he would have not only grain for his nation, but grain to sell to the other nations.It tells the principle that we need to learn to live within the cycles of nature.Investing and allocating money requires that same understanding.With that said, I focus on what I believe the rate of inflation will be and how it relates to investments. I trust that understanding inflation will make for better informed investment decisions.I've been involved in stocks and investing since I was 13. Have had successes and mistakes, that I've hopefully learned from. I'm a fan of the following people to help give a perspective of my biases I may hold with regards to investment and economics: Adam Smith, Milton Friedman, Charles Schwab (Steel Tycoon), Peter Bernstein (Author), Henry Ford, Jay Gould, Ben Franklin, Aristotle, to name a few..

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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