Interest rates are expected to rise and lumber prices to continue falling
June 5, 2022 | 10:21 am CDT
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As the Federal Reserve contemplates additional interest rate hikes, pressure is expected to mount on the housing market and lumber prices are expected to fall.

Lumber prices have dropped 48% year-to-date as mortgage rates jumped above the 5% threshold, according to Markets Insider.

After reaching board feet prices that reached greater than $1,400 in March, lumber 
prices fell below
the $640 level for the first time in 2022 on May 24. Lumber has not yet hit bottom as several factors weigh on wood’s price.

The weakness in lumber began to accelerate once rates for the traditional 30-year fixed mortgage rose above 5% earlier this year. That has put pressure on both new and existing home sales in recent months, and various home builder surveys indicated a steep drop in demand once rates surged.

Fed Vice Chair Lael Brainard told CNBC  that it's "very hard to see the case" to pause interest rate hikes as the effective Fed Funds rate is still way below the neutral rate.

"We've still got a lot of work to do to get inflation down to our 2% target," Brainard said. That work includes multiple 50 basis point interest rate hikes, which are fully expected by investors at the Fed's June and July meetings. 

For September's Fed meeting, the market fully expects at least 25 basis point interest rate hikes, according to a Markets Insider report.

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About the author
Larry Adams | Editor

Larry Adams is a Chicago-based writer and editor who writes about how things get done. A former wire service and community newspaper reporter, Larry is an award-winning writer with more than three decades of experience. In addition to writing about woodworking, he has covered science, metrology, metalworking, industrial design, quality control, imaging, Swiss and micromanufacturing . He was previously a Tabbie Award winner for his coverage of nano-based coatings technology for the automotive industry. Larry volunteers for the historic preservation group, the Kalo Foundation/Ianelli Studios, and the science-based group, Chicago Council on Science and Technology (C2ST).