Lumber holds above $640/mbf as supply constraints outweigh weak single-family demand

Price action: bouncing off a floor

Benchmark lumber settled at $654.53/1,000 board feet on July 24, 2026 according to Trading Economics data, down 0.45% on the day but holding the $640-655 range established over the past month. The market has been grinding higher since early summer after prices found support in the low-$600s. CME lumber futures were last recorded at $633/mbf in mid-June, and the spot CFD market has since lifted into the mid-$640s to low-$650s, consistent with a market that has found a bottom and is consolidating.

The year-ago comparison is still negative: prices sit 2.9% below July 2025 levels. The current range sits above the $440-540/mbf average range forecast for 2026 by analysts at BuilderMuse, who note that the North American market is being driven toward the upper end of that band by supply-side constraints. A sustained move below $400/mbf is viewed as unlikely barring a sharp economic downturn, because Canadian mills covering 3 billion board feet of annual capacity have already shut, and the 14.54% softwood tariff creates a de facto landed-cost floor for imports.

Supply: the permanent shrinkage of Canadian capacity

Three billion board feet of Canadian sawmill capacity has been permanently removed since 2018. Most of it in British Columbia, where timber access has effectively collapsed. The province's allowable annual cut has fallen by roughly one-third over 20 years — timberland set-asides, Indigenous rights settlements, a mountain pine beetle infestation that ran for a decade, and escalating wildfire losses have each taken their share.

The closures are not cyclical. University of British Columbia forestry professor Gary Bull has called for an "emergency response" to the fibre supply crisis. Western Forest Products' Cowichan Bay sawmill remains curtailed through September 2026. West Fraser Timber has announced the indefinite curtailment of its High Level, Alberta OSB mill, which will close once the site's existing log supply runs out. Conifex has curtailed production by approximately 13 million board feet, citing duty and tariff increases that have "significantly compressed cash margins" across the sector.

Analyst Russ Taylor sees little relief before 2027. The BC government deployed a CA$20.8 million grant program to stabilize Western SPF production and support roughly 1,400 forestry workers, but analysts at LumberFlow argue this is a backstop, not a solution. The structural constraint is timber access, and no grant program can replace a third of a province's annual cut overnight.

North American lumber production is now at its lowest level in a decade, according to HBS Dealer industry research. That should help rebalance inventories and support pricing as demand recovers. But the cost to buyers may not just be higher prices, but physical scarcity of certain dimensions and grades.

Demand: a split market

US housing starts jumped 19% in June to a seasonally adjusted annual rate of 1.427 million units — above the 1.31 million consensus forecast, according to US Census Bureau data released July 17. But the headline number masks a deeply split market. Single-family starts fell for a third consecutive month, dropping 0.2% to 895,000 SAAR, down 3.2% year-over-year. The entire June surge came from multifamily construction (5+ units), which rebounded sharply after a steep May decline.

This matters for lumber because a single-family home uses roughly 14,000 to 16,000 board feet of framing lumber, plus 40-50 sheets of sheathing. A multifamily unit uses significantly less lumber per unit. The NAHB noted that "elevated mortgage rates and higher construction financing costs continued to weaken builder confidence," and permits for future single-family construction dropped to their lowest level in 10 months, suggesting this weakness persists into late 2026.

NAHB chairman Bill Owens pointed to the newly enacted housing supply bill as a potential long-term positive, but noted it "will take time for these measures to take effect." Mortgage rates remain elevated, builder sentiment depressed, and a glut of unsold new homes on the market is further discouraging new starts.

Repair and remodeling demand holds steady. OSB is the stronger of the two panel segments — Random Lengths data shows the structural panel composite firming, with OSB the most volatile component. Retail sheathing prices in July 2026 show 7/16" OSB at $14-20 per sheet versus 1/2" CDX plywood at $28-52, with OSB carrying a 40-50% discount per sheet.

Analyst views: three diverging scenarios

Bull case

The bull camp points to structural supply depletion as the dominant price driver. With Canadian capacity permanently removed and US Southeast mill expansion insufficient to close the gap, any demand recovery — from rate cuts, housing supply legislation, or R&R spending — will encounter a supply system that cannot respond quickly. Trio Forest Products notes that OSB and structural panels "found a bottom and began to bounce" in early July, and "bigger waves are on the horizon" from AR6 trade rulings, wildfire impacts, and further curtailments. Under this scenario, lumber could test $700-750/mbf by Q4 2026.

Bear case

Bears argue the demand side is broken. Single-family starts have declined three months straight. Permits are at a 10-month low. Mortgage rates remain elevated and the Federal Reserve has signaled no near-term cuts. A glut of unsold new homes means builders are sitting on inventory. LumberFlow's May analysis showed Southern Pine prices dropping 5.2% as "US mortgage payments hit $2,131, shifting the broader lumber market to a cautiously bearish stance." If the single-family market does not recover, demand for framing lumber will remain soft and prices could drift back toward the $500-550 range.

Base case

Most analysts cluster around a range-bound market. BuilderMuse forecasts lumber trading $440-540/mbf on average for 2026, with tariffs and constrained capacity providing a floor and weak single-family starts capping the upside. The current $640+ level sits above that range, suggesting a premium driven by near-term supply tightness that may ease as Canadian mills running on BC's grant program stabilize production. The most likely path: prices settle into the $550-650 range through Q3 2026, with seasonal autumn weakness potentially pushing toward the lower end.

Policy and trade: the AR6 ruling

The US-Canada softwood lumber dispute continues to evolve. The combined tariff rate, including anti-dumping and countervailing duties, now approaches 14.54%. More significantly, the upcoming AR6 administrative review ruling — expected later in 2026 — could adjust rates further. Canada is intensifying efforts to have the US remove the duties, with British Columbia Premier David Eby arguing that cumulative duties have forced mills to curtail production or shut down.

On the US side, Washington lawmakers are seeking measures that would encourage processed hardwood lumber exports rather than raw log shipments, arguing that exporting unprocessed timber further weakens domestic supply chains. Rising US log exports to China have also drawn scrutiny as a factor weakening domestic lumber supply.