Demand for wood products is expected to increase in 2024 by 3% to 4%, says Dustin Jalbert, senior economist for wood products at Fastmarkets, a commodity price reporting agency.

“I think the reason that we’re optimistic is that interest rates are falling again,” Jalbert says.

An uptick in activity would follow a 1% to 2% decline in demand this year, compared with 2022, he says. While demand was down, the market outperformed expectations. Jalbert had told the Journal last year that he expected a 4% decrease in demand in 2023.

“This year has actually come in better than we anticipated," he says. “A lot of that just had to do with the housing market.” 

Residential construction, which includes both new construction and repair and remodel projects, makes up about 70% to 80% of the wood products market in the U.S., Jalbert says.

The biggest factor in this year's dip in demand has been higher interest rates, because housing has become less affordable.

“If you want to talk about a macro driver that kills housing, it’s interest rates,” he says.

The Federal Reserve began raising rates in March 2022 to combat high inflation.

“When rates spiked, affordability went out the window," Jalbert says. "That really took a lot of demand out of the (wood products) market.”

In Spokane County, residential construction has slowed in 2023 compared with the year prior, says Joel White, executive officer at the Spokane Home Builders Association.

"We have seen a decline in building permits this year," White says. "Multifamily is still stronger than single family.”

White says he expects a decline in demand for wood products in Spokane in 2024, because affordability issues are slowing qualified demand for housing, which in turn is leveling off demand for building materials. He adds, however, that the demand is dependent on mortgage rates.

The price of lumber has corrected, for the most part, following the significant price increases during the pandemic.

As of Dec. 12, the price of lumber was at $534 per thousand board feet, up from $491 the year prior, but down from a peak of $623 earlier this year, according to industry publication website Trading Economics. The price of lumber peaked at $1,686 in 2021, the data shows.

Jalbert says, “Prices crashed again and really have been at fairly suppressed levels since the summer of 2022 into 2023."

While prices are getting closer to pre-pandemic numbers—lumber prices ranged from $306 to $419 per thousand board feet in 2019—Jalbert says he expects them to increase by about 5% to 10% next year.

PotlatchDeltic Corp., a Spokane-based forest-products company, posted third-quarter net income of $23.7 million, down from a net income of $46 million in the third quarter of 2022. PotlatchDeltic owns nearly 2.2 million acres of timberlands across seven states.