Policy-Driven Supply Shock Reshaping Lumber Industry
The North American lumber industry is facing significant challenges in 2025, marked by a combination of permanent mill closures, escalating Canadian duties, and the potential implementation of new Section 232 tariffs under former President Donald Trump’s trade policies. These developments threaten to reverse decades of tariff reductions and fundamentally alter the industry’s cost structure. Senior economist Dustin Jalbert warns that even without the most extreme tariff scenarios, the industry’s cost dynamics are undergoing a significant shift.
The industry has also seen unprecedented capacity rationalization, with approximately 5 billion board feet (BBF) of production capacity permanently closed. This reduction in capacity, coupled with the potential for new tariffs, could lead to supply constraints and increased prices for lumber products. The situation is further complicated by a post-pandemic demand recalibration, with consumption levels approximately 9% below COVID-era peaks.
Economic risks add another layer of uncertainty. The potential for a major recession, coupled with sustained high mortgage rates, poses a significant downside risk. Retaliatory measures from trading partners could further elevate bond yields, eliminating the typical relief provided by lower financing costs during economic downturns.
Overall, the North American lumber industry finds itself at a pivotal and precarious moment, facing policy-driven supply shocks and broader economic uncertainties that could reshape it for years to come. The combination of trade policies, economic risks, and market dynamics requires industry participants to stay informed and adaptable to navigate the challenges ahead.
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Housing Market Update
The Colorado housing market in early 2025 is experiencing a shift toward a more balanced environment. Statewide, the median sales price in November 2024 was $626,600, reflecting a 2.1% year-over-year decrease. Despite this decline, sales activity has increased, with a 12.3% rise in homes sold and an 11.4% uptick in pending sales. Inventory levels have also grown by 18.6%, providing buyers with more options and contributing to a 20% increase in the months of supply, now at 3.9 months . These trends suggest a cooling market where buyers have greater negotiating power, although affordability remains a challenge for many.
In Custer County, the housing market presents a more localized picture. As of February 2025, the median sold price was $501,500, marking a 7.9% increase from the previous year . However, the market has seen fluctuations; for instance, November 2024 recorded a median sale price of $370,000, down 27.8% from the preceding month . Homes in the county are taking longer to sell, with an average of 150 days on the market as of January 2025 . This extended timeframe indicates a buyer’s market, where supply exceeds demand, allowing buyers more leverage in negotiations.
The lumber market plays a crucial role in housing trends. Fluctuations in lumber prices can significantly impact construction costs, which in turn affect home prices and affordability. Increased lumber costs can lead to higher home prices, potentially dampening buyer demand, while decreased costs might encourage new construction and renovations, influencing market dynamics.
Overall, Colorado’s housing market is transitioning toward equilibrium, with increased inventory and slower price growth offering more opportunities for buyers. Custer County reflects these broader trends but with its unique fluctuations, emphasizing the importance of localized market analysis. Prospective buyers and sellers should stay informed about both regional and local market conditions to make strategic decisions.
