Lumber prices have risen to levels not seen since August 2008 because of a shortage of supply. When the housing market cratered, mills in the U.S. and Canada cut production; output plummeted about 45% between 2005 and 2009, according to Random Lengths, an industry data provider.

The market basket of 9 lumber products tracked by Purchasing magazine have increased 23% in the spot market since the nadir in April 2009. However, their average price of $255 per thousand board feet still is 20% lower than the last peak of $329 in May 2006.

Analysts expect lumber prices to increase in 2010-possibly by as much as 13% for the Purchasing-tracked group-- because of an uptick in demand from the long-ailing U.S. housing construction industry.

The Dow Jones Newswire reports that lumber's price rise contrasts with a recent decline in most other commodities, such as fossil fuels and industrial nonferrous metals. Those are dragging due to fears of weaker demand amid a fragile recovery from the lingering financial crisis outside North America.

But lumber prices have increased lately because there is little slack in the supply chain, according to wholesale distributors. "Any increase in demand is going to allow the mills to raise their prices," Gary Vitale, president of the North American Wholesale Lumber Association, tells the Wall Street Journal.

The supply crunch is striking because, in 2005, the North American lumber industry was able to supply enough wood to start more than two million homes a year. That was nearly four times the pace of 591,000 home starts in January. Housing is the largest single source of demand for lumber but saw mills lost too much money in the lean years of 2007 and 2008 before finally cutting shifts and idling plants in 2009, and they don't have the necessary capital to restart shuttered operations now. In turn, wholesalers shrank their own inventories in 2009 and have had little incentive to build them back up yet.

Matt Layman, publisher of Layman's Lumber Guide in Belmont, N.C., tells the Wall Street Journal that the ongoing housing construction recession will keep lumber production light for some months. He says the wood products industry is waiting to see whether lumber demand is actually rebounding, beyond the annual restocking, before expanding saw-cutting operations.

While she agrees with other market analysts that lumber prices will continue to rise over the near term, IHS Global Insights economist Arminé Thompson says "the increase will be at a slower pace than after past recessions because the recovery in the single-family construction sector will be sluggish."