Construction Backlogs Hit 22-Month Low as Demand Cools

Impact on Your Procurement Strategy

The latest data from ABC and the MBA paints a sobering picture for residential lumber demand. The Construction Backlog Indicator's drop to 8.1 months is its lowest point since February 2024, with the sharpest declines occurring among contractors with under $30 million in annual revenue. Because these smaller firms are the primary drivers of residential wood consumption, their shrinking backlogs directly translate to reduced pull-through for 2x4 and 2x6 dimensional lumber at the distributor level.

Labor trends further validate this slowdown. While the broader construction industry added jobs, the residential sector shed 300 positions in November, extending a negative six-month trend where the sector has lost an average of 3,600 jobs per month. This indicates that builders are not just pausing—they are actively scaling back capacity. For procurement managers, this means the 'labor constraint' that previously slowed project completions is being replaced by a 'demand constraint,' which typically leads to downward pressure on SPF and SYP pricing as mills compete for a smaller pool of orders.

Furthermore, the 7.0% month-over-month decline in mortgage applications for new home purchases suggests that the spring building season may lack its usual momentum. While contractors remain somewhat optimistic about sales, only 33.6% expect profit margins to expand, the lowest share in over a year. This anxiety stems from rising material costs hitting a wall of weakening demand. In this environment, the risk of holding high-priced inventory outweighs the risk of short-term supply gaps.

Buyers in the US South and Western Canada should monitor mill responses closely. With Canadian job vacancies down 2.8% and overall construction unemployment at a low 4.7%, the industry is lean, but the lack of new residential project starts (evidenced by the 3.0% weekly drop in purchase applications) suggests that the current pricing floor may be fragile. Expect a quiet January with potential for price concessions as mills look to build order files for February.

Key Takeaways

• Residential construction has lost 42,200 jobs over the past year, indicating a sustained contraction in wood-intensive building activity.

• New home mortgage applications decreased 7.0% in November, pointing to a slow start for the 2026 framing season.

• Small contractor backlogs are at their lowest level in four years, reducing the immediate need for high-volume dimensional lumber restocking.

Market Outlook

Pricing Trend: DOWN

Confidence Level: MEDIUM

Recommended Action: Maintain just-in-time inventory levels through January. Avoid bulk SPF/SYP buys until mortgage application trends reverse, as current macro signals point to a pricing correction in early Q1.

How LumberFlow Helps

Use LumberFlow's quote comparison dashboard to verify that your suppliers are reflecting the macro-driven softening in their current offers. You can also set automated price alerts to be notified the moment SPF or SYP prices hit your target buy-zone.

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