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While Random Lengths’ framing lumber price measures have dropped about 50% over the past seven weeks, prices paid by builders have only fallen a “fraction” of that amount, according to the National Association of Home Builders.

In a post on the NAHB Now blog, NAHB explains why, when prices drop, there may be a long lag time before those drops “trickle down” to builders—and conversely why builders feel price increases much more quickly.

To maintain margins, retailers and wholesalers do their best to buy low and sell high. At the very least, they try to avoid buying high and selling low, which happens to be the biggest risk in an environment of rapidly falling prices. For example, had a lumberyard quoted a client at prevailing prices two weeks ago, it would be taking a 25% loss relative to current pricing. Thus, a supplier that quotes clients at current market prices will consistently lose money when prices are falling.

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