Lumber futures reach two-year highs – Charles Schwab

Lumber futures prices have made a complete recovery from its coronavirus induced sell-off with the market trading at prices not seen since July 2018 as market participants underestimated the demand for housing, per Charles Schwab. 

Key quotes

“While sales of newly built homes were up nearly 13% in May, housing completions were down 7.3% month over month which shows that home builders are struggling to keep up with demand for newly constructed homes and a large percentage of the sales were for homes that have not yet been built. This construction backlog should help to keep demand for lumber strong heading into the fall.”

“While industry analysts note that a reduction of duty rates of nearly 50% starting October 1 should encourage Canadian sawmills to increase production going into the end of 2020 and help ease the current supply tightness, lumber prices may stay elevated at least until we start to see new housing demand begin to slow and home builders reduce their current backlog.”

“500.00 is seen at the next resistance level for the September contract, with chart support seen at the July 2 high at 443.80.”