When Will the Lumber Price Bubble Burst?

This study investigates lumber price bubbles in the U.S. through the generalized supremum augmented Dickey-Fuller (GSADF) approach. The outcomes explore that lumber prices have explosive behaviour and confirm multiple bubbles. The first bubble is driven by import tariffs, transport bottlenecks, strong housing demand, the Sino-U.S. trade war, wildfires and weather severity. The second bubble is caused by the pandemic, resulting in a historic shortage and demand increases because of new housing, renovation, low-interest rates, and tariffs. The last bubble is driven by falling production, absences of the workforce and transportation. The findings are consistent with the present value model, which describes that bubbles exist when the market price exceeds the fundamental price. Moreover, the logit regression concludes that house price, industrial production, inflation and economic uncertainty have a positive impact except for interest rates. The administration should resolve the tariff, transportation and full capacity productions, which can ensure the stable supply and lumber market avoid abrupt price changes.