Lumber Distributors NAICS 423310

Sep 10, 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 24% 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.
• Apartment construction is increasingly shifting away from dense urban centers toward less populated and more affordable regions, according to the NAHB’s Q1 2025 Home Building Geography Index and reporting by Smart Cities Dive. Since 2016, large metro core counties have seen a 9.6 percentage-point drop in market share for apartment starts, hitting a low of 35.5%. The trend is fueled by affordability concerns, demographic shifts—especially the rise of older renters seeking suburban lifestyles—and project owners favoring lower-cost developments in exurbs and rural areas. Developers are pursuing projects farther out where land is cheaper and expansion is easier, though total activity in these areas remains relatively small.

• North American single-family construction and engineering spending in 2025 is expected to grow by 1% after increasing an estimated 2% in 2024, according to FMI’s third-quarter 2025 North American Engineering and Construction Outlook. FMI projects that 30-year mortgage rates will stay between 6% and 7% through 2026, impacting affordability. A recent jump in new apartment supply and unfavorable cost conditions will reduce multifamily spending by 9% in 2025, but the widening cost gap between renting and buying a home supports the multifamily market in the long term. The aging of the US housing stock and high home values drive demand for residential improvement spending, but high interest rates and elevated materials and labor costs will limit home improvement spending to 1% growth in 2025.
• Home remodeling spending growth is expected to remain flat in 2025 and the first half of 2026, according to the Leading Indicator of Remodeling Activity (LIRA) report by the Joint Center for Housing Studies at Harvard. Homeowner improvements and repairs are expected to increase 2% to $509 billion in the third quarter of 2025 compared to Q3 2024. In the fourth quarter of 2025, remodeling spending will rise quarter-over-quarter to $511 billion, up 1.8% from Q4 2024. Spending will increase to $524 billion in Q1 2026, up 2.2% from Q1 2025. In the second quarter of 2026, year-over-year spending is forecast to rise 1.2% to $518 billion. Joint Center expects a weak housing market to put downward pressure on remodeling spending. However, recent federal cuts to incentives for efficiency improvements may spur short-term growth as homeowners make upgrades before benefits expire at the end of the year.