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Over the last few years, the North American wood products market has experienced wild swings in demand, unpredictable supply chain disruptions and historic policy changes. As we look ahead, you might be wondering when the market will finally stabilize and return to a steady growth pattern.
The short answer is that 2026 will bring its own unique set of challenges. A mix of global energy shocks, a massive artificial intelligence (AI) investment boom and ongoing tariff uncertainty will likely delay a true housing recovery. However, understanding these macroeconomic forces gives you the power to protect your margins and prepare your business for the anticipated rebound in 2027.
Let us break down exactly what happened in 2025 and explore the four major headwinds shaping the North American wood products market in 2026.
To understand where we are going, we must first look at where we have been. 2025 marked another tough period for wood products demand in the North American market. Housing starts weakened significantly, repair and remodeling (R&R) growth remained flat and furniture production took a notable hit.
Overall, total North American wood products consumption fell by 0.7%. But when we look at the specific product categories and the impact was uneven:
One of the biggest factors looming over the 2026 housing recovery is the global energy shock. The ongoing conflict in Iran has disrupted roughly 20% of global liquified natural gas (LNG) and 15% of oil supplies. This represents the biggest energy supply shock in history.
The recent energy shock is reverberating through the supply chain, driving up costs at every stage. Logging operations, already navigating a soft product market are now being squeezed by soaring fuel expenses. To bring finished products to market, mills and wholesalers are introducing fuel surcharges. And resin costs—a key component for both structural and nonstructural panels—remain under intense pressure.
Spiking energy prices act as a direct tax on consumers. When households spend more on gas and utilities, their overall wealth drops. This is bad news for discretionary spending, which includes home purchases and major renovation projects. Our forecast suggests that West Texas Intermediate (WTI) crude oil prices will remain elevated for the next few years. If the conflict worsens and pushes oil prices significantly higher, the odds of a US economic recession will rise sharply.
Don’t let market volatility catch you off guard. Stay ahead with our North American wood products forecast today. Learn how our short and long-term forecasts can help your business
You might not think that data centers and artificial intelligence (AI) impact the lumber yard, but they all directly affect your bottom line. At first glance, US gross domestic product (GDP) growth looks robust. But when you look closer, anywhere between one-third to one-half of that growth is coming from data center construction.
We expect to see around $600 billion to $700 billion in AI capital expenditures in 2026. This massive investment wave is keeping overall inflation and interest rates high. Because inflation remains a stubborn threat, the Federal Reserve will likely tread very lightly on any interest rate cuts.
For the housing market, this translates to mortgage rates staying higher for longer. Furthermore, the AI boom is actively competing with residential construction for land, labor and capital. By driving up the costs of these essential resources, the tech sector is effectively crowding out home builders.
Policy uncertainty is reemerging as a major headwind for the housing and wood products sector.
Recently, a Supreme Court ruling temporarily lifted certain tariffs based on the International Emergency Economic Powers Act (IEEPA). However, most goods still face heavy tariffs, which places intense pressure on builder margins. Additional Section 301 investigations are currently underway, keeping trade uncertainty elevated for the foreseeable future.
On the domestic policy front, the US government has proposed a slew of housing affordability measures aimed at stimulating demand. Simultaneously, more supply-driven reforms, such as the ROAD to Housing Act, are working their way through Congress. While these policies aim to help the market, they are not without controversy. However, these policy shifts are unlikely to improve the demand picture until 2027 or 2028.
When we consider all the current market pressures, from the energy shock and AI investment wave to high mortgage rates and tariff uncertainty, the outlook for the coming years becomes more complex. We’re seeing macroeconomic shocks that are impacting both consumer and builder demand.
Factors like lower real disposable income are likely to affect the pace of recovery in residential construction, with single-family housing starts and R&R spending feeling the impact. However, we don’t expect this trend to last forever.
Assuming a wind-down of the global energy conflict later this year and a stabilization of interest rates, we anticipate a market rebound. Although the underlying need for housing remains strong, current economic conditions are just postponing, not eliminating, the decision to buy a home.
You cannot control global energy conflicts or the Federal Reserve’s interest rate decisions. But you can control how you prepare your business for the months ahead. Connect with our team today and let us help you turn market uncertainty into a clear, actionable business strategy.