2026 Forest Products Outlook: Key Takeaways for a Shifting Industry

From national economic trends to housing demand, lumber supply and global trade shifts, many economic forces are shaping the U.S. forest products industry. In a recent Farm Credit East webinar, Paul Jannke, of Forest Economic Advisors, provided an economic forecast pointing to a year of stability, modest growth and continued adjustment across the forest products sector. The following are the key insights from the webinar.

A Sluggish but Stable U.S. Economy

The U.S. economy continues to walk a tightrope between persistent headwinds and strong stabilizers. While growth remains modest, the nation is still expected to avoid recession, with GDP rising in the 2–3% range over the next few years. The Federal Reserve’s GDPNow estimate shows first quarter 2026 growth rebounding to 2.7%, signaling improvement after a soft end to 2025.

Consumer sentiment has been trending downward, though it did tick up recently, while business confidence remains subdued compared to historical norms. Geopolitical uncertainty and an ongoing regional conflict that has added volatility to energy prices, influencing confidence. However, these pressures are offset by strong household fundamentals. Rising real wages, larger tax refunds and historically low debt service ratios continue to underpin consumer spending power.

Another stabilizing force is that the yield curve has returned to normal. This has improved lending conditions and reduces recession risk, one of the primary reasons economists do not expect a downturn in 2026.

Housing Affordability Challenges

Housing remains a critical driver of lumber demand, and affordability is still the sector’s biggest hurdle. Buyers need roughly $120,000 in income to afford a median priced home, far above the current U.S. median of $85,000. Despite this gap, the picture is gradually improving. Home prices have begun to fall, builders are producing smaller and more cost efficient homes, and real wages continue to rise.

Mortgage rates, temporarily elevated due to the Iran conflict, are expected to ease again once the geopolitical environment stabilizes. Still, they are unlikely to return to 5% anytime soon, keeping pressure on affordability in the near term.

However, long term fundamentals remain strong. The U.S. is entering a period where large population cohorts in their early 30s, prime homebuying years, are driving powerful demographic demand. This follows 15 years of underbuilding, which has created an estimated five-million-unit housing deficit.

Lumber Demand and Pricing Outlook

Lumber consumption is expected to increase only modestly, around 200 million board feet, in 2026 due to soft housing starts and cooling repair and remodel activity. More substantial growth of 1–1.5 billion board feet is projected for 2027 as affordability improves and builder confidence stabilizes.

On the supply side, North America has lost over 1 billion board feet of capacity due to mill closures, mostly in Canada, while the U.S. South continues expanding. This shift is driving price dynamics across the continent.

Early year price increases were driven primarily by supply constraints, not demand. As mills ramp up production, prices may soften before rising slightly later in the year. Overall, expect 3–4% higher prices in 2026 compared to 2025.

To dive deeper into the above topics, review the webinar recording along with the presenter’s PowerPoint slides, or read the 2026 Forest Products Industry Outlook.