Lumber at $654/mbf as Supply Tightening Outpaces Modest Housing Demand

What is driving lumber prices higher in late July 2026?

CME lumber futures have rallied sharply over the past month, with the benchmark contract touching $654.52 per 1,000 board feet on July 24, the highest since August 2025. The 5.99% month-on-month gain reflects a market where supply constraints are beginning to bite more aggressively than demand-side weakness would suggest. According to Trading Economics data, lumber is still 2.89% below its year-ago level, meaning the recovery is from a low base rather than a return to boom conditions. The last time prices traded sustainably above $650 was mid-2025, before the spring weakening set in.

Supply constraints: Canadian capacity and tariff pressure

The supply side tells most of this story. British Columbia lost 1.4 million hectares of forest to wildfires in 2023, and the impact on recoverable timber is still compounding. Canadian lumber production fell 6.9% in 2025, and Forest Economic Advisors (FEA) expects further reductions in 2026. Combined countervailing and anti-dumping duties on Canadian lumber sit at just over 45% as of mid-2026, according to Farm Credit East. These rates squeeze mill margins and accelerate curtailments. British Columbia Premier David Eby has intensified efforts to have the U.S. remove softwood lumber tariffs, arguing that cumulative duties have forced mills to curtail production or shut down entirely. The tariff picture may shift in August 2026, when analysts expect a roughly 10% reduction in combined CVD and ADD rates. Farm Credit East estimates this would reduce the cost of Canadian lumber imports, offsetting some of the upward price pressure from tight fundamentals. North American sawmill capacity declined 1% in 2025 despite massive post-COVID investment in the U.S. South. Further closures expected in the second half of 2026 will reduce capacity further, according to FEA data. The net effect is lower spare capacity across the industry, meaning even modest demand increases can produce outsized price moves. Regional dynamics are diverging sharply. Southern Yellow Pine mills in the U.S. South benefit from plentiful private timberland and ongoing capacity investment. Western Canadian mills face lasting fiber constraints from beetle-kill timber depletion and reduced annual allowable cuts. This geographic divergence will persist for years.

Demand: housing starts improve but mix matters

Total U.S. housing starts jumped 19% in the most recent reading, but the increase was driven primarily by multifamily construction, which is less lumber-intensive than single-family homes. Single-family starts are running at approximately 980,000 units annualized in early 2026, down from about 1.03 million a year earlier, according to BuilderMuse. Multifamily starts have declined more sharply, running at approximately 350,000 units annualized versus 410,000 a year ago. The apartment market is absorbing a large inventory of units that started in 2023 and 2024, and financing conditions remain challenging for new multifamily projects. Repair and remodeling continues to provide a solid demand base, estimated at $420 billion in 2026. However, residential improvement expenditures fell roughly 5% in 2025 and are expected to decline another 2% in 2026, according to Farm Credit East. This partially offsets new-build demand. FEA projects total North American lumber demand on mills at approximately 46-48 billion board feet in 2026, below the 50+ BBF consumed during peak building years but sufficient to support prices at or above current levels given the supply constraints. U.S. softwood lumber consumption in new housing is expected to grow 8.4% in 2026 to 18.8 BBF.

Analyst views: gradual upward bias with volatility

Forest Economic Advisors forecasts lumber prices to average $510/mbf for S-P-F 2x4s in 2026, with SYP 2x4s rebounding to $400. For 2027, FEA sees prices rising further to $540 and $455 respectively as demand growth drives operating rates higher. Other analysts are more constructive. Tree Frog Forest Products Research expects lumber prices to move up in 2026 as supply reductions related to high duties and tariffs begin to bite harder. The Framing Lumber Composite Index increased 9.8% in 2025 and analysts expect a 16% price jump in 2026, driven by improving operating rates. The bull case rests on the demographic underbuild: the U.S. housing shortage is estimated at 3.8 million units. Falling mortgage rates and pent-up demand from millennials and Gen Z are expected to fuel an 11% construction surge. Canadian lumber supplies about 25-30% of the U.S. market, and any further curtailments north of the border would tighten supply rapidly. The bear case centers on the R&R slowdown and the multifamily-heavy housing mix. If mortgage rates stay elevated and R&R expenditures continue declining, total lumber consumption could fall short of expectations. The anticipated 10% tariff reduction in August could also pull Canadian supply back into the market, capping further upside.

Forward catalysts

Key events to watch in the coming months: the August 2026 CVD/ADD rate decision, which could alter the cost structure for Canadian imports; the fall building season, which typically determines whether summer inventory builds are absorbed; and the pace of mill closures in British Columbia, which will set the floor for 2027 supply. Lawmakers in Washington are also seeking measures to encourage processed hardwood lumber exports rather than raw log shipments, arguing that exporting unprocessed timber weakens domestic supply chains and employment. Any legislative movement could shift trade flows in 2027 and beyond.