Many cities were already seeing people move out of the cities, COVID-19 only expedited the migration. The last time I was in New York City to visit my month, it reminded me of the time when I took my mother back home after Hurricane Sandy. The streets of NYC were fairly empty, nothing like “the city that never sleeps.”
This morning I talked about the semiconductor chip shortage, but how events 12-18 months ago led to the current crisis. A very similar thing happened in the lumber industry.
At the onset of COVID-19 lumber prices declined as home builders construction halted their operations, leaving mills with excess supply of lumber. But all that has changes since the economy started opening up again last Spring. And as the inventory for lumber declined, mills could no longer keep up with demand which created a huge imbalance in the supply and demand equation for lumber. And as people continue to move out of cities, the huge imbalance in the supply of homes continues.
Despite lumber used for framing homes accounting for roughly 20% of the materials cost of building a home, homebuilders are just passing on the cost to the buyers. So has demand for homes continue, expect lumber prices to continue to move higher.
Video Source: https://www.youtube.com/c/CNBCtelevision/videos
With U.S. lumber prices at fresh record highs, construction companies and wood wholesalers are buying just enough to get by, threatening to make price swings even bigger.
“Everyone knows that current prices are stupid, but the choice is either pay up or run out,” Vince Bulic, president of Vancouver-area Yaletown Lumber Industries Ltd., said in a Jan. 22 note. “Comfortable prices do not seem to be on the near-term horizon.”
Prices on the physical market have largely tracked the rallies in futures prices, with some time lag, signaling higher prices are yet to come for buyers.
After lumbers prices had a huge correction in January, it was actually a buying opportunity as the chart suggest prices will end the week at all-time highs.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
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The housing market is booming around where I live right now. If you sell your house you need to be able to move out and find a place to live right away. I think it is happening all over the country. Houses are selling for 10% to20% above asking price. With so little inventory, it isn't surprising that more and more people are making the choice to build. If I ever got in a pinch and really need some lumber and didn't want to pay the premium price I would just get in touch with my buddy. His dad owns a sawmill and kiln. High quality/small quantity stuff he puts out, so he is probably making a killing right now.
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Oh, yeah, it's a great time to be in the lumber field right about now. Crazy how things work and how things affect each other.
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This is a great insight Roland great article! Maybe a dumb question, but if lumber prices are climbing is it possible that home builders will just switch over to a different material?
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Thanks @rob23...awesome question. I think the other materials of construction still cost more than lumber...so for now, lumber is king.
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Fair enough!
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I had to by 2x4 for my bar and it’s was almost $6 a board...
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EEUU the new venezuela 🤔🤔
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None of this, "The Thing" makes no sense? How is it possible that housing prices are rising? Traveling and rental cars being non-existent?
The mainstream media is continually barking out "Fear" and the talking points are surrounded with negativity. Yet, when you look at what is happening in the economy? Unemployment numbers along with other economic indicators it would appear that housing starts/construction/sales would be in a downward spiral?
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We had a hurricane hit back this Summer and I talked to a friend whose church he goes to was destroyed. Contractors are actually giving estimates with steel frames instead of lumber as the cost of 2x4s are so expensive in our area right now, it's cheaper to go back with a steal frame.
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