On today’s show we are looking at a divergence between lumber futures prices and current lumber composite prices.
These two graphs always tend to track each other, sometimes with a small delay. But the prices always follow the futures. However, this is a moment in time when the lumber futures are diverging.
The week-to-week framing lumber composite price fell by 0.5% on June 27, 2025, declining to $422 per 1,000 board feet. This was the 12th consecutive week of declines, and the lowest price since October 2024. The falling prices reflect falling demand for lumber as construction starts continue their steady decline. Production also fell in response to the fall in demand.
But the July Futures price is $615, September is $664 and November is $675. That's a 60% premium over the current spot price.
Holding physical lumber (spot price) incurs costs. This includes warehousing, insurance, and the cost of capital tied up in inventory. Futures prices reflect these "carrying costs" that would be avoided by buying a contract for future delivery rather than purchasing the physical commodity today and storing it. Storing that lumber incurs interest costs if the inventory is financed. So part of the difference in price is explained by the cost of carrying physical inventory.
There is anticipation of future increase in demand for new construction later this year and into next year. So the market is forecasting growth, even though the market is clearly experiencing a decline over the past 6 months.
Finally, the trade war is anticipating supply side constraints as we have already seen a 6% decline in lumber from Canada entering the US. This is further anticipated to amplify as the trade dispute continues.
This will make forecasting of construction costs more difficult for the foreseeable future in the US which will put downward pressure on new construction until the uncertainty is removed.
------------
**Real Estate Espresso Podcast:**
Spotify: [The Real Estate Espresso Podcast](https://open.spotify.com/show/3GvtwRmTq4r3es8cbw8jW0?si=c75ea506a6694ef1)
iTunes: [The Real Estate Espresso Podcast](https://podcasts.apple.com/ca/podcast/the-real-estate-espresso-podcast/id1340482613)
Website: [www.victorjm.com](http://www.victorjm.com)
LinkedIn: [Victor Menasce](http://www.linkedin.com/in/vmenasce)
YouTube: [The Real Estate Espresso Podcast](http://www.youtube.com/@victorjmenasce6734)
Facebook: [www.facebook.com/realestateespresso](http://www.facebook.com/realestateespresso)
Email: [podcast@victorjm.com](mailto:podcast@victorjm.com)
**Y Street Capital:**
Website: [www.ystreetcapital.com](http://www.ystreetcapital.com)
Facebook: [www.facebook.com/YStreetCapital](https://www.facebook.com/YStreetCapital)
Instagram: [@ystreetcapital](http://www.instagram.com/ystreetcapital)