Free Markets

Insane Lumber Prices Show How Governments Break Economies

Lockdowns, tariffs, and other market interventions made wood an expensive commodity.

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If, like me, you went to purchase lumber within the past few months for your garden, shelves, or other home projects, you found yourself paying through the nose for materials—or else putting off the work in hopes of lower prices in the future. It's even worse if you're a awaiting a new home, since expensive lumber is adding tens of thousands of dollars to the price of building the average house. You can blame pandemic-era lockdowns, tariffs, and other government interventions in the market for much of the pain—and officialdom proposes to make things worse.

"Soaring lumber prices that have tripled over the past 12 months have caused the price of an average new single-family home to increase by $35,872," the National Association of Homebuilders warned in April. "This lumber price hike has also added nearly $13,000 to the market value of an average new multifamily home, which translates into households paying $119 a month more to rent a new apartment."

Prices have recently come down a hair, but lumber is still at over $1,400 per thousand board feet, compared to a bit over $400 per thousand board feet a year ago. The problem has multiple causes, finds an analysis in ConstructionDive, a trade publication, including public health mandates that shuttered or restricted many sawmills even as people confined at home turned to DIY projects that required materials. More demand for reduced supply inevitably spikes prices.

Even before the pandemic, though, 30 large mills permanently closed their doors because of the Great Recession, according to the U.S. Forest Service. That mess resulted from foolish regulatory interventions in the financial markets, with a particularly large impact on the housing industry.

"[W]e identify a potent mix of six major government policies that together rewarded short-sighted collective risk-taking and penalized long-term business leadership," wrote the University of Michigan's Mark J. Perry and commercial real estate banker Robert Dell in 2010. "[T]he banking crisis should be understood more fundamentally as a government failure than as a market or business failure."

Rising lumber prices would seem to be a good incentive to restart those mills, but it's not that easy. "[T]here isn't enough labor to work the sawmills that are open at full capacity," notes ConstructionDive, with expanded unemployment benefits shouldering much of the blame. "A truck driver shortage, plus higher diesel fuel prices, also mean that it's less profitable for timber owners to ship logs to sawmills."

That leaves domestic production of lumber lagging behind demand, with prices rising as an inevitable result.

So, what about imported lumber? The United States, after all, isn't the only country to grow and harvest trees. But idiotic government trade restrictions stand in the way of alleviating high lumber prices in the U.S. with products brought in from elsewhere.

"Amid surging lumber prices that are already adding an average of $36,000 to the construction cost of new homes, the Biden administration is moving forward with plans to double tariffs on lumber imported from Canada," Reason's Eric Boehm reported last week.

While former President Donald Trump is often rightly criticized for his protectionist policies, and did, in fact, impose a 20 percent tariff on Canadian softwood lumber in 2017, his administration slashed that duty to 9 percent last year as lumber prices soared. The Biden administration, on the other hand, proposes to hike tariffs once again, to over 18 percent for many firms, based on the premise that Canadian producers "made sales of subject merchandise at less than normal value" (we should be so lucky). 

"It is a particularly egregious move, seeing as how lumber prices are still near multi-decade highs (still, despite a recent dip, up over 300% from one year ago) and US timber firms remain unable to sate demand," points out Peter C. Earle of the American Institute for Economic Research. "The increased costs will ultimately fall upon American citizens in the form of higher prices and decreased availability of goods and services."

That is, in the midst of soaring prices and short supply of lumber in the United States, the federal government is doing everything in its power to choke off other sources of the stuff that might fulfill demand and help to bring down costs. 

In fact, it's easy to see the U.S. government's mistreatment of the market for lumber—not just the industry itself, because the impact falls heavily on consumers far removed from timber growers and sawmills—as a horrifying example of officialdom's overall economic incompetence. Through poor financial policy, the government reduced the number of domestic suppliers. With tariffs, it raised the price of imported lumber for American consumers, further restricting their options. Then governments imposed pandemic measures that hobbled many sectors of the economy, sawmills included. The federal government also offered expanded unemployment benefits, incentivizing people to not take jobs, making it difficult to expand production and virtually impossible to bring mothballed sawmills back online. And now the Biden administration wants to further hike tariffs that will make imported products more expensive.

If you deliberately set out to hurt Americans through this one sector of the economy, you couldn't be more effective. But this is government we're talking about here, which makes the premise of Hanlon's razor (framed earlier and slightly differently by Robert A. Heinlein) more persuasive: "Never attribute to malice that which is adequately explained by stupidity." What government officials and their ill-considered policies have done to the lumber industry is mind-bogglingly stupid.

Unfortunately, the results of government mistreatment of the lumber market go beyond stupidity to impose massive expense, as any home handyman or building contractor will attest. Lumber prices will eventually come down (maybe sometime in 2022 as supply rises to meet demand) but not until much of the public is paying a high cost for the results of policy mistakes. When government officials fumble around with things they don't understand while pretending they're making improvements, they leave the rest of us picking up the tab for the breakage—especially when they break the economy.

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  1. Do any of those assholes in DC look like they have ever worked with their hands to you? Those assholes have to guess what it is like to actually build something. The only tool that Chuck Schumer has ever held in his hands was flesh colored and had veins,

    1. Well, IIRC my favorite Congressperson AOC used to have a blue-collar job. But that’s OK because now she fights for the billionaire employer agenda on issues like immigration.

      #ImmigrationAboveAll

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      2. Well said! The billionaire employers sway the issues of the immigrated workers. Refer government jobs @ https://kodigital.in

    2. I belueve Massie built most of his house

    3. I mean, Dan Crenshaw was a navy SEAL just like you pretend to be. Hell, you two might have rubbed elbows over there! Of course since you were in your mid 40s at the time you might not have noticed him, what with the age related macular degeneration. Do the SEALs have a senior bracket? LMFAO

    4. You’re seriously turning on at least half the Reason staff right now with these dick jokes.

      1. PS: I’m referring to the men, not the women.

    5. Yeah, I’m betting Schumer had to jack a lot of older guys off to get where he is today. His hand tool skills are probably excellent.

  2. What a great time to start-up a lumber company and *earn* more money than you could ever imagine.

    Oh whoops; Don’t forget to get a permit/permissions from the [WE] gov-gun toting gangs out there hugging the trees for their hell-on-earth wild fire. Don’t forget to get a permit/permission from the [WE] gov-gun toting gangs of incompetent workers demanding $15/hr to count jelly beans. Don’t forget to get a permit/permission from the [WE] gov-gun toting gang of land grabbers (They pretend it’s their “management” job of other peoples land). Don’t forget to get a permit/permission from [WE] gov-gun toting EPA who’ll tell you the sky will fall down if you run a kern and therefore ‘good luck’. Whatever you do; be sure to hire all black females and pay them 2x more than their actual value or the [WE] gov-gun toting “progressives” will be lobbying to hang you by a tree.

    What would the USA do if the only thing [WE] gov-gun toting gangs did was defend Individual Liberty and Justice??? Heck; this country just might be on the path to success for a change instead of another ‘Great” failure it’s currently headed for.

    1. “incompetent workers demanding $15/hr to count jelly beans.”

      Wait, are you talking about opening a lumber company or a candy store?

      1. A lumber company with self-entitled employee’s who think they get to count jelly beans for their pay…

      2. Jelly beans or 2X4’s – doesn’t matter. Employers don’t want to ante up $15 an hour for any labor. Leaves us without workers, never mind mills to work in when child care is at $16 an hour.

        Everything is going through the roof price wise because of coronavirus shut downs/bankruptcies/business failures/and zero planning for leaner times. Lumber is only ONE item – and it’s not a survival item like housing, medical, food, and clean water. Stop whinin’ like lumber is the only story.

        1. …Or it’s the $10T in *free* USD from printing press causing prices to skyrocket and leaving employment-labor value comparatively in the gutter just as the USD flushes to the gutter.

    2. Don’t even worry about it – you’ll never even get permits to build the damn thing anyway.

      1. “Don’t even worry about it”
        The race to the bottom…..
        How many human resources, skills and progress can the gov-guns oppress this week?

  3. “as a horrifying example of officialdom’s overall economic incompetence”

    On the other hand, it is incredibly competent if you admit the democrats want to eliminate single family homes and force us all into the great collective.

    1. There’s yet another big lie. Show us the source that says democrats are forcing you out of your single family home…

      1. lmao… Easy peasy –
        There’s literally 100’s of EPA cases shoving people out of their homes. (Stossell reviewed a few). Ever growing ‘property’ tax that bankrupts homeowners? Generally increased by Democrats.

        But lets just skip to the Biggest Democratic Government show of kicking people out of their homes — Enter Obama’s first term with full Democratic Congress and a Great Recession that brought about the term ‘Tent Cities’.

        1. You can’t blame Obama for a recession that began before he was elected – but you can and should (mostly*) blame him for the slowest recovery since Hoover and FDR. In normal economic cycles, an economic dip follows a “panic”, but in two or three years the economy is back to normal growth. Obama stretched the great recession out to 8 years.

          *Bush contributed to the problem by borrowing his opposition’s corporatist policies and bailing out the biggest companies that had fouled up the most – leaving the least competent big banks in business to foul up again, and GM to remain in a self-induced coma right up to the present. But Obama’s regulations and spending continued to hold the economy back for much longer.

          1. Fair Enough – Bush Jr. in my book was a RINO.
            Any President that has, [WE] gots big “plans” seems to be.

  4. But I was just told in the pocahontas thread that raising labor costs should be a given since I don’t pay enough compared to unemployment.

    So if artificially raising labor costs doesn’t affect the cost of goods or increase inflation, then why would raising commodity prices?

    Oh, you mean those things do increase the cost of goods, increase inflation, and thus the cost of living?

    Someone should tell the leftists here that.

    1. “artificially raising labor costs”

      Does *not* cause inflation. Instead, inflation causes nominal wages to rise. Artificial costs *shift* prices from elsewhere.

      Sorry. All the recent terrible press and editorializing about renewed inflation has hypersensitized me to how popular notions about inflation were debunked about 70 years ago, but won’t seem to die.

      1. https://www.zerohedge.com/economics/accelerating-wages-early-upturn-resemble-70s-business-cycles

        “Companies would counter, saying it took three times the consensus gain (0.6%) in average hourly earnings, and probably other compensation-sweeteners, to attract the 559,000 workers in May.

        Rising wages so early in a business cycle resemble the US economy of the 1970s, not the one investors and policymakers have seen since 1980. Rising labor costs will continue to put downward pressure on firms operating margins, which have already declined for the past two quarters, and add to general inflation pressures that policymakers would soon discover are not “transitory.” Investors and policymakers forewarned.”

        ” In May, average hourly earnings for private-sector workers, excluding supervisory staff, rose 0.6%, three faster than consensus estimates. That comes on the heels of an even more significant 0.8% increase in April. That two-month increase is the fastest in this wage series since 1983 (excluding the wage distortions during the pandemic).”

        ” In the 1970s, wage growth started to accelerate immediately when the economy began to recover, similar to what is happening nowadays. Each period has unique features, but the common themes are the lack of labor supply and the need to raise pay to attract workers. Both episodes contrast to the wage pattern that emerged in the four economic upturns from 1980 to 2020. In each of the four economic upturns since 1980, wage gains for private-sector workers decelerated for several years, enabling companies to source cheap labor and expand profit margins. Part of that deceleration also reflects the shift in hiring from relatively higher-paid to lower-paid workers.

        Yet, in the past six months, over one-third of new jobs were created in the lower-paid industries (i.e., leisure and hospitality), and average hourly earnings growth still accelerated to its fastest rate since 1983.

        Once started, wage cycles gain momentum of their own. Faced with a shrinking supply of skilled and unskilled labor, companies start competing with each other. And employed workers, along with people sitting on the sidelines, become well aware of the more worker-friendly environment and use it as leverage to gain more pay and benefits.

        Record job vacancies say the wage cycle has a long life ahead and is not “transitory” or temporary.”

        1. Now, raising wages is fine if required by a free market. But we don’t have that. We have the government paying people via stimulus and expanded unemployment more than the free market rate for many low skilled or entry level jobs. Giant corporations can much more easily increase wages and benefits than smaller companies, so theyre raising wages to compete with the stimulus. Forcing smaller companies like mine to increase wages as well. But since we’re all competing with the government instead of within our own markets, it’s driving the cost of EVERYTHING up.

          The government is basically mandating a minimum wage of 15$/hr right now with these unemployment benefits. And libertarians should know all about what that does to an economy. Reason has written many articles about the bad results of 15$ min wage in Seattle.

        2. My point about bad press is made. Thank you.

          1. Economic growth or recovery do not cause inflation.

          2. Imposing wasteful costs does not cause inflation.

          3. Price floors, subsidies, and market dominance do not cause inflation.

          4. Some price increases are not inflation.

          5. Inflation is the increase in the average of *all* prices, denominated in a particular currency.

          6. Inflation is everywhere and always a monetary phenomenon. Everything else is some prices increasing while other prices fall, market driven or not.

      2. Inflation DOES NOT cause wages to rise.

        Inflation is excess money NOT put into the economy

        Get an Economics book instead of being stupid and lecturing others. You can read?

    2. “The federal minimum wage was last raised on July 24, 2009, when it rose from $6.55 to $7.25 per hour, the last step of a three-step increase approved by Congress in 2007. Before 2007, the minimum wage had been stuck at $5.15 per hour for 10 years.”

      Cry me a river. Pay a decent living wage and stop letting the wealthy and the corporations pay nothing or a pittance of their income in taxes while the wage earners with 2 jobs carry their tax freight for them percentage wise.

      1. Put a second/third mortgage on your house and open a business then comment about what other people should pay workers.

        1. ^^THIS +1000000000000..
          In the ‘original’ USA; anytime one didn’t feel treated fairly there was always the ‘option’ to do themselves (do it “better’). Seems today’s mentality is legislating the “least common denominator” for everyone.

      2. lying about corporatins not paying tax…so lame.

        They dont pay when theres no income

        Your LIES are Marxism not economics

  5. Does anyone find credible Yellen’s “nothing to see here” hand-waving about inflation? 2022 could be a real financial shitshow. I have no idea how to prepare for it.

    1. She said higher interest rates will “be a plus” for the US.

    2. Yellen is never credible.

    3. You move your investments out of cash and into inflation-resistant stores of value, whatever those might be. A lot of people think it’s gold. I’ve always believed that children are our future, personally.

      1. You can hedge against inflation, but you cannot avoid its costs.

        Still, I’m a little skeptical of the inflation numbers. Estimating inflation from sample prices is always inaccurate, particularly in the face of massive noninflation-associated price disruptions. But, inflation is a sustained phenomenon, so time will tell. Fed governors are universal high inflation hawks, but Congressmen are still their masters. And the Treasury craves cash more than ever.

        1. The thing is, the United States has never actually experienced hyperinflation, unless you count confederate dollars. It happens for pretty specific reasons, like basing your currency on precious metals and not having options to be dextrous with the supply (because huge foreign debt obligations are imposed, for example).

          The utility of fiat money and a functioning central bank is precisely that it can tweak the money supply to prevent money-supply-related disasters.

          Politically speaking it’s a go-to hysteria for those interested in cutting public spending but don’t have a good argument.

          1. On point, Tony. The greedy are loathe to share, and not about to do the right thing unless someone forces the issue. We shouldn’t have handouts. Government assistance is not always the answer.

            I lean more toward providing opportunities for people to work – like vouchers for child care instead of a check to spend on anything, food allotments, housing subsidies sent to reputable landlords (not slumlords like Kushner), and assistance with heating bills, water, and electric. Not open ended – find a job, start earning an income, then find a better one eventually, and a better one. Anyone receiving assistance should have to take something as interim employment within a couple of months versus ‘holding out’ for a job for top pay. You should do what you have to do – not become dependent on another to support you.

            1. Fair enough, I just don’t share your moral premises. I don’t think it’s any of my business whether other people work (usually in service to others’ profit). But I do make it my business to feel bad for living in a wealthy society that permits starvation in children. So that’s a matter of moral precepts, which are debatable, and then we simply reallocate existing resources to fulfill them, which is the job of policymaking.

  6. This lumber price hike has also added nearly $13,000 to the market value of an average new multifamily home, which translates into households paying $119 a month more to rent a new apartment.

    One might wonder how an increase in the price of wood would affect the price of things that were built from wood and sold before the price of wood went up. I guess my coffee table is now a retirement plan.

    1. Are you willing to sell me your Tesla shares that you bought for $200 a year ago for $200 today?

    2. It’s almost as if reduced new supply makes already existing supply more valuable.

      1. We had our supplies for the re-roofing of our house delivered, including 2 pieces of plywood. We locked it in the garage until it was needed because building materials are being stolen faster than the work crew can get to the site.

  7. Mostly bullshit. Virtually none of those construction projects happen over the last year (or the last decade or more) without interest rates being subsidized and distorted. Of course you add one distortion on top of another and another and another and you end up with a cluster#$%^.

    But the origin of all of these distortions is the price of capital. And Reason is always at hand to ignore that. Perfectly content with decades of bubbles marketed as ‘free markets’ with billionaires and rentiers the beneficiaries.

    1. Construction didn’t stop during the Gov enforced shutdowns

      1. Of course it didn’t. There are no economic cycles anymore. No recessions. Capitalism is a wonderful thing ennit

      2. Inslee shut most of it down for nearly 3 months in WA. Had a contractor friend get a $5k fine when he got marched out for spending 20 minutes on a customer’s roof doing a makeshift patch to stop a huge leak into the homeowner’s living room. It eventually got dropped, but it was a huge pain for him to get rid of it.

  8. Basic Economics says this article is true. The US Government is at best as effective as the sum of it’s parts. In reality, it is further hindered by public choice theory and other factors. The lumber market bears the fruits of this statist behavior.

    1. Don’t forget hundreds of small, locally owned lumber mills that Clinton used the spotted owl hysteria to kill off. Those lumber supplies would have come in mighty handy recently.

  9. Don’t be too hard on the government in this case. It’s not like lumber grows on trees.

    Oh, wait…

  10. Tariffs are nothing wrt lumber prices, and Canada was locked down hard anyway. That tariffs and trump needed to be mentioned are de rigueur around here because TDS is a mental illness.

    1. Regardless of the scale of the tariffs, the reasons given to justify them, were and are complete buffoonery masking larcenous cronyism.

      That being said, some of that larceny was even economically significant and costly.

      No surprise though that replacing old Democrat Trump with old Democrat Biden is only entrenching some of the worst of Trump’s antimarket policies. Reagan’s loyal opposition played the long game, and their victory in Federal policy is total and bipartisan.

    2. Canadian readers take note that GOP catamites know nothing of logging. At the claim I worked in B.C. there were roughly 2 people per hundred square miles.

      1. Oh fuck off.

    3. And…people are moving from Cities because of the PaNDEMic. Nothing to do with the 3rd world vibes, crime and optics. Peaceful protests sparked a run on lumber to board up cities and exurbs, read that last July.

  11. Now do ammo prices

  12. Perhaps the democrats should switch the assault rifle panic to a panic over rifles with wood stocks, and start a tax deduction for buying plastic guns?

  13. Another good article from Tuccille.

  14. So we’re gonna stick with the plan, huh?

    It wasn’t a global natural disaster that affected the supply and demand of commodities… it was meddling governments imposing lockdowns for no apparent reason.

    1. That (lockdowns) and vast inflation of the money supply by the world’s central banks…

      1. I just need to know whether you understand that the lockdowns were not random exercises of authority.

        Global natural disasters fuck with economies. That would be with or without lockdowns, since people were largely disengaging from the normal economy with their own free will out of fear of dying from the disease.

        1. The disaster was the idiotic reaction by dolts like Luv Guv and Whitless you fucking moron.

          1. I think you get both your so-called opinions and your whimsical diction from somewhere similar, neither of them scientific sources.

  15. Boosting M2 26% YoY in 2020 has had that effect on a vast number of prices for raw, intermediate and final goods in 2021…

  16. When I get wood it doesn’t cost anything.

  17. The tarrifs existed before the price jump its all about the pandemic and people moving away from cities creating demand but worse is inflation from all the government spending over the last 5 years that includes Trump spending and Biden spending

  18. You want yoy hyperinflation here it is: medical procedures that used to be done in 10 minutes in a GPs office (dermatology Basel cell, steroid shot in the spine, all kinds of others ) are now considered SURGERY and sent to Specialists to perform. Now, new Dentists do not do root canal or pull teeth. It’s Surgery and requires teams of crony’s sucking off of the ACA, DOH and (govt) teet. Young generations are fucked.

    1. Absolutely right. Older practitioners with their own practices are busier than heck because the new ones refer everything out…..when dentists my age (>60) retire, our patients will be screwed! They’re teaching more social justice than medicine and dentistry in the professional schools. So the people who sjws prepare so earnestly to help now have even less access as the young docs are very limited in ability and there aren’t nearly enough specialists.

    2. Lie. inflation has nothung to do with prices.

      Inflation is excess money NOT put into the economy. Its inflation of MONEY SUPPLY NOT USED. NOT price increases

  19. That truck driver shortage is working out for me though. I’m averaging about $3500 a week as a driver, after taking a one semester class at the local community college that cost $800, *including* the price of the CDL road test.

    Kinda makes getting a university degree look like a sucker’s game. Then again, the lifestyle does really suck.

  20. Don’t know if this has already been mentioned but counterintuitively, the value of trees for lumber has plummeted to a degree that it’s barely worth selling them at this time. I’m specifically talking about pine but don’t know about hardwoods etc.

  21. A few important points the article misses. First, this lumber shortage, tariffs on Canadian lumber etc comes during a time when the U.S. is disentangling from other economies. Maybe a person should wonder if there is some bigger picture that the public is about to get clobbered with. Second, it isn’t really up to the government to make policy with regard to natural resources which keeps prices down and encourages consumption. The Chinese are in the processes of lowering prices by official decree, and any curious person can watch and see how that works.

  22. Visiting again for reading. Raising Cane’s Chicken Fingers is a fast-food restaurant chain specializing in chicken fingers founded in Baton Rouge, Louisiana by Todd Graves and Craig Silvey on August 26, 1996. Check the Raising Cane’s Menu With Prices

  23. Lumber prices going over the top of ever before, are another keen example of the gross incompetence of the politicians that get repeatedly reelected to office. As a profession, politics should not be an option. People get elected from the community, serve in their office for the term and then should go back to their profession, trade, or other employment in the private sector. Spending more than two terms in office should be a one off career diversion and not life long careers. Those who stay for many terms are showing a bad character trait of becoming addicted to power. This is exactly what Biden has done.

  24. Timely read; this daughter of a mechanic know the value of a dollar and has her own tools…in 1983, I worked as a rate clerk at a trucking company and made $6 an hour, adjusted for inflation that is $16.12. Government is corporate greed…pontificate, speculate, blame, lumber is costly because America offshored decent jobs 40 years ago and has become increasingly inept by most measures ever since

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