Impact on Your Procurement Strategy

The framing lumber market is hitting a price plateau following a 6.2% three-week rally. While the 12-week trend remains positive, gains are decelerating. The Relative Strength Index (RSI) has reached 74, signaling an 'overbought' market where prices have outpaced underlying demand. For procurement managers, this indicates a high risk of a looming correction.

US Demand Signals: The Mortgage Bankers Association reported a 2.0% decrease in purchase applications for the week ending February 6. While refinances remain active, the drop in purchase activity—the primary driver for new residential construction—suggests homebuilders are slowing their pace. Borrowers are also shifting toward FHA loans and ARMs, indicating affordability pressures that typically lead to smaller home footprints and more conservative lumber ordering.

Canadian Market Divergence: December permit data shows a 6.8% rise in total value, but this was driven entirely by the multifamily sector. Single-family permits—the primary consumer of dimensional lumber—fell by $119.7 million. This divergence is critical: headline growth is not translating into the demand needed to clear 2x4 and 2x6 inventory.

Strategic Outlook: With volatility at 11.4%, the risk of a sharp retracement is high if mill order files thin. We recommend 'watchful waiting.' As momentum stalls, mills may offer 'off-sheet' discounts to maintain volume. Focus on high inventory turns and cash flow management rather than speculative buying.

Key Takeaways

• Restrict purchases to a 14-day supply as technical indicators (RSI 74) suggest the market is overextended and vulnerable to a price correction.

• Monitor the 2.0% drop in US purchase applications as a leading indicator of slower yard pull-through for the remainder of February.

• Realign inventory toward multifamily-spec products to capitalize on the $653.2 million increase in Canadian multifamily permit values.

Market Outlook

Pricing Trend: STABLE

Confidence Level: MEDIUM

Recommended Action: Halt speculative buying and restrict procurement to fill-in orders only through Feb 20. Protect margins against an overbought technical ceiling and the 2.0% weekly decline in US mortgage applications.

How LumberFlow Helps

Leverage the weekly price forecast to detect the transition from plateau to correction. Use LumberFlow to identify motivated suppliers as demand softens, and track daily market insights for real-time volatility updates.

Ready to stay ahead of market trends? Book a consultation with our team to see how LumberFlow's procurement platform transforms dimensional lumber buying.