Lumber Distributors NAICS 423310

Sep 23, 2025 - Weak Housing Demand, Supply Glut Sends Lumber Prices Lower

• Falling lumber prices could pinch distributor margins if the value of lumber on hand declines significantly. Lumber futures have plunged since early August, signaling economic caution amid trade uncertainty and a weakening housing market, according to The Wall Street Journal. Spot prices saw a similar drop over the same period. A glut of wood - stockpiled in anticipation of higher tariffs on Canadian imports - has collided with softening demand, prompting major producers like Interfor and Domtar to curtail output. While high lumber prices during the pandemic stemmed from inflation and supply chain strain, current declines result from reduced construction activity and tariff volatility. Analysts warn that further production cuts are likely as the market adjusts to oversupply and shifting trade dynamics. Distributors holding higher-cost inventory could see margins suffer if they cut prices to match competitors who bought more recently on the spot market.
• The average 30-year mortgage rate was the lowest in nearly a year in the second week of September, increasing buying power for would-be homeowners, but headwinds for a housing recovery remain, according to The Wall Street Journal. The week of September 18, the weekly average for a 30-year fixed-rate mortgage was 6.26%, down significantly from 7% at the start of 2025, and marking the lowest rate since October 2024, according to Freddie Mac. Industry insiders suggest the frozen housing market may begin to thaw when rates are consistently below 6%, a financial and psychological signpost for many. However, affordability remains a challenge as home prices are about 50% higher than in 2019. Insurance and property tax costs are also elevated. Signs of a slower labor market may also give some potential buyers pause.

• Home builder confidence in the single-family market was unchanged in August but remained solidly in negative territory in September, according to the National Association of Home Builders (NAHB). Home builder sentiment, as measured by the NAHB/Wells Fargo Housing Market Index (HMI), remained at 32 in September 2025, unchanged from August’s reading. Any HMI reading over 50 indicates that more builders see conditions as good than poor. Home builder sentiment has been stuck in the 30s since May 2025, but in the most recent survey, builders were optimistic that interest rates would move lower and stimulate demand. The HMI survey also showed that 39% of builders reduced home prices in September to lure potential buyers off the sidelines, although the average price reduction of 5% has remained unchanged since November 2024.
• Single-family housing starts fell 7% month-over-month and decreased 11.7% year-over-year in August. The number of building permits issued for single-family, privately-owned housing units dropped 2.2% month-over-month and fell 11.5% year-over-year in July 2025. With just 890,000 single-family homes breaking ground, August marked the lowest activity since April 2023. Builders may be slowing production amid a mounting oversupply of new homes on the market, according to Reuters. The Federal Reserve cut its benchmark overnight interest rate from 4.25% to 4.0% on September 18 amid a tepid labor market, and the central bank is expected to announce more cuts before the end of the year. In anticipation of the Fed rate cut, mortgage rates moved lower earlier in September. Industry insiders hope rate cuts will ease a prolonged housing slump.