Key takeaways:

• Our 2026 North American lumber market outlook predicts that demand for wood products will stabilize, supported by falling interest rates and renewed home improvement activity.
• We expect overall consumption for wood products in the North American market to remain flat.
• According to our North American lumber forecast, we expect softwood lumber capacity to decline by over 1.3 billion board feet (BBF) due to ongoing mill closures in British Columbia and the US South.
• Market trends suggest that lumber duties may fall to 15-20%, while reduced Brazilian panel imports and continued tariffs are likely to drive modest price increases across most wood product categories.

Another challenging year is in the books for the North American wood products industry. To recap, demand disappointed as affordability challenges festered with inflation and interest rates remaining sticky. Compounding this, uncertainty surged with the onset of a trade war and a prolonged government shutdown. Mill asset closures continued in response to sustained weakness, though not at the same clip we saw in 2024. Confidence across the building materials and broader forest products complex is probably the lowest we have seen since the Global Financial Crisis.

Forecasting in this policy-driven environment has been challenging to say the least. And while the dust seems to be settling on many fronts, much remains in question given ongoing trade negotiations, elevated recession concerns, a push by the current administration to reignite home building, and pronounced pessimism in the lumber and panel markets.

So, what does our wood products team at Fastmarkets expect for the North American wood products market in 2026? Below are five key predictions that we believe will drive the market this year.

1. Demand will stabilize across most wood products
One of our key forecast misses in last year’s “Predictions” piece was the call for a demand turnaround in North American wood products that did not materialize. While interest rates continued to fall as predicted and the US did avoid a recession despite much speculation, affordability challenges paired with the explosion of uncertainty due to the trade war amplified the drags on home buying and construction activity.

The good news is some of this trade related uncertainty should subside in 2026 as more trade deals are inked and the administration walks back some of the most onerous tariffs, as we saw on December 31 with the postponement of further increases on furniture, cabinets and vanities.

Interest rates, while descending at a slower pace than we expected, should continue to fall as inflation cools and the Federal Reserve pivots further to address labor market uncertainty. The first half of the year should also get a fiscal boost from Congress passing the One Big Beautiful Bill (OBBB) last year as substantial tax refunds hit household bank accounts. Just recently, the White House also announced a plan to purchase mortgage back securities to help push mortgage rates lower. Other plans to support builders seem in the cards as well.

Residential construction, which accounts for about 70-80% of wood products demand in North America, should see some modest, albeit unspectacular, improvements under these macroeconomic conditions. Even marginal improvements in affordability should at least help stabilize the crucial single-family market, which saw an estimated drop in starts of 8-10% last year. Although slowing off its current pace, we also anticipate more multifamily projects will pencil out as rates continue to ease and upzoning efforts in many jurisdictions across the country help drive more affordable housing construction.

Finally, home improvement activity, which based on our Fastmarkets Repair & Remodeling Index has shown signs of reacceleration, should continue to gain momentum as real disposable income remains steady and drops in short-term interest rates stimulate more HELOCs to drive home improvement projects. Pent-up project demand is also substantial in the space, and should be unlocked by more certainty on inflation and the jobs front later this year.

Demand will vary by product, but we expect wood products consumption in the US to remain flat in 2026, with structural panel markets performing the strongest, while nonstructural panels will experience greater weakness as those products are still feeling the downshift in home completions and domestic furniture and cabinet production. While downside risk to the outlook exists, Fastmarkets believes the significant losses from last year should pause again in 2026 as the wood products market transitions to a reacceleration phase later in the year that sets up solid growth in 2027. However, in the meantime, demand will still remain challenging as near-term headwinds continue to be pronounced.

2. Softwood lumber capacity losses will accelerate to over 1 BBF
Shuttering of industry capacity has been an ongoing theme in the softwood lumber market for the past several years. Average annualized operable capacity in 2024 and our preliminary estimates for 2025 show a similar drop in operable capacity (-0.7 billion board feet (BBF)). While losses since 2017 have focused on the struggling British Columbia market, we have seen a pronounced surge in southern yellow pine (SYP) closures in the US South in response to weak market conditions and historic discounts for SYP compared with competing species.

Of course, industry rationalization reflects a number of factors, including declining demand since 2021, compressed margins from prices correcting back to pre-pandemic levels for many key items and pronounced stress in Canada from longer-term structural fiber challenges in BC, steadily rising lumber duties on Canadian supply and now 10% tariffs stacked on top of that.
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Source: fastmarkets.com