Falling Lumber Costs Could Spell Trouble for the Broader Economy

Lumber prices have dropped 24% since early August, hitting their lowest level in a year.

Jordan B.
September 10, 2025

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Good morning. Lumber prices have plunged to a one-year low, raising concerns about slowing housing demand and escalating U.S.–Canada trade tensions. The shift could have ripple effects across construction, investment, and the broader economy.

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Lumber Lows

Falling Lumber Costs Could Spell Trouble for the Broader Economy

Lumber just hit its lowest point in a year, raising fresh concerns for housing and construction activity.

By the numbers: On September 1, lumber fell to $526.50 per thousand board feet, a 52-week low. Futures are down 24% since early August’s three-year high. With residential fixed investment making up about 4% of U.S. GDP in 2024, lumber’s swings are closely watched as a leading economic indicator.

Why it matters: Lumber has long been a bellwether for U.S. housing. Sharp declines usually signal weaker homebuilding and remodeling—key drivers of jobs and growth. Today’s dip suggests builders are pulling back under the weight of higher borrowing costs.

Supply outpaces demand: This year’s drop stems more from oversupply than shortage. Mills stocked up early in 2025, expecting steep Canadian tariffs, while shifting White House policy fueled price swings. But producers ignored the real hurdle: weak demand. Simply put, there’s more wood than the market needs.

Industry response: Major producers are pulling back. Interfor, one of North America’s largest lumber firms, will cut output 12% amid weak conditions and uncertainty. Analysts warn more shutdowns could follow if prices stay low, with Truist Securities expecting broader industry cutbacks.

Market context: During the pandemic, lumber prices soared to unprecedented highs, a symbol of supply chain breakdowns and surging inflation. They were also among the first commodities to falter once interest rates began climbing. Today’s backdrop is different: supply is ample, but demand has slowed, keeping prices under pressure.

Policy backdrop: The White House is weighing a broad tariff on imported lumber, echoing moves on steel, aluminum, and copper. Canada remains central to the dispute, with duties on its softwood shipments jumping from 15% to 35% in August, escalating a decades-long trade fight.

➥ THE TAKEAWAY

Big picture: Falling lumber costs might help builders on paper, but they signal something bigger: weakening housing demand. Until activity picks up, expect more mill cutbacks—and watch for whether today’s savings foreshadow tomorrow’s slowdown in construction and CRE.

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🏘️ MULTIFAMILY

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Housing pivot: Vornado is planning a $350M, 475-unit rental tower in Manhattan’s Penn District, signaling a strategic shift from office towers to residential development.
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🏭 Industrial

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