Reading the National Association of Home Builders Online for March 8, 2010, it had this to say:

“For the week ending on Feb. 19, the Random Lengths composite index stood at $317 per 1000 board feet, its highest level since the first half of July 2006.  that price was up more than 26% from the start of this year, when framing lumber was averaging $251.

During the first half of 2009, the index fluctuated around the $200 mark, before moving into the $250 range in late November.

(Random lengths’ composite index is a weighted average of 15 softwood lumber product prices.)

Residential construction is the chief driver of demand for softwood lumber, said NAHB Senior Economist Bernard Markstein.  With residential construction activity remaining at historically low post-World War II levels, most supply-side factors were responsible for the dramatic surge in lumber prices, at least for the short term.

• With the Random Lengths cost of lumber remaining low – below $300 – for about two-and-a-half years, companies shut down many of their mills and cut back on logging operations by the second half of 2009, with significant layoffs of workers.  This led to severe lumber constraints by the end of last year, which were probably worsened by normal mill shutdowns for the holidays in December and January.
• Unusually cold and wet weather in much of the southern U.S. and parts of Canada limited logging operations even further, helping to drive up prices.
• Demand has increased from paper and pulp mills.
• Given the cost and time involved in restarting shuttered mills, mill operators have been reluctant to ramp up production until they can be confident that higher lumber prices will prevail for an extended period and not just a few weeks.  Once a decision is made to reopen a mill, it can take several weeks to check out and service idled equiipment and to rehire workers.”

For the complete story, read the article:NAHB.Online.March8.2010

Source:  National Association of Home Builders News Online.March 8.2010