FRAMING LUMBER PRICES, WHICH HAVE trended down since early 2006 and have been consistently below $300 per 1,000 board feet since mid-2006, may be headed back above $300.

According to the Random Lengths lumber market report, framing lumber prices on June 1 were $295, with structural panels reaching $306 per 1,000 board feet.

According to a report from Random Lengths, the price pick-up for lumber may be due to a renewed balance between the demand for lumber and supply. Demand for lumber has taken a hit during the housing industry downturn; as fewer houses are being built, demand for framing lumber has waned.

The lumber industry was slow to adjust its production, and timber production outstripped the housing industry's ability to absorb the supply. As a result, framing lumber prices declined from regularly being over $400 in 2005, to the high $300s in early 2006, to below $300 for most dates after September 2006.

A trade agreement (the U.S.-Canada Softwood Lumber Agreement) implemented in November 2006 also helped curtail the lumber supply from Canada, says Bernard Markstein, NAHB senior economist. That reduced supply, taken together with continued cutbacks in lumber production domestically, could bring the supply-demand equation back into balance, according to Random Lengths.

And that shifting balance could lead to increasing prices for builders, says Markstein.