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Lumber Prices Crash 50% As Fed Tightens
Zubu Brothers ^ | 6-3-2022

Posted on 06/03/2022 9:53:23 PM PDT by blam

Lumber prices have been halved since the Federal Reserve embarked on its most aggressive interest rate tightening campaign in decades as the pandemic boom in housing slows.

Lumber contracts trading on the CME crashed to $653 per thousand board feet, down 51% from a high in late February of $1,336. The decline in wood prices occurred about two weeks before the Fed began hiking interest rates in mid-March.

The Fed is expected to continue raising rates this summer. Interest rate probabilities show the Fed could hike by 50bps at three of the next FOMC meetings to suppress consumption and get inflation under control ahead of the midterm elections. However, that’s going to be a challenging task, which may cause a hard landing in the economy.

Fed Chair Jerome Powell’s pursuit of finding the neutral rate has already unleashed a rate shock in the housing market, with the 30-year fixed-rate mortgage shooting up more than 200bps this year, from 320 bps to 557 bps. This has crushed activity for refinancing houses (remodeling) and sent mortgage applications (home construction) plunging, a sign the housing market is cooling.

Signs of a slowdown in construction are already materializing: “Buyers don’t have the same mentality of having to go out and buy 10 when they only need five,” Ash Boeckholt, co-founder and chief revenue officer at online wood-products marketplace MaterialsXchange, told WSJ.

A monthly survey from John Burns Real Estate Consulting of building-products dealers shows only 12% had tight lumber inventories in April, down 61% from last year. Lumber is a leading indicator and suggests higher prices and soaring interest rates have helped fix shortages that were stoked during the pandemic lockdowns of easy money and robust demand for housing.

Lumber is still double the price of the three-decade trend of $359. Matthew Saunders, who leads John Burns Real Estate Consulting, said that prices are expected to stay above pre-pandemic levels despite improving supply chains and falling demand for wood.

“We believe that they will trade above long-term averages for the balance of the year. However, in the short term, lumber is down more than 50% from the most recent peak. The market is trying to determine where the new price equilibrium compared to slowing demand and increased supply,” Josh Goodman, vice president of inventory and purchasing at Sherwood Lumber, told GlobeSt.com.

Another sign lumber demand is declining is directly from one of the largest wood producers in North America, Canfor Corp, who reduced operating schedules at sawmills in Western Canada. Since March, Canfor has operated sawmills at 80% of production capacity.

On the retail side, traders and analysts have noticed slumping demand for lumber at Home Depot and Lowe’s as consumers shift away from home-improvement projects to spending money on vacations.

The Fed will frontload interest rate hikes this summer which could pressure lumber prices even lower. Perhaps, if some readers have been waiting to build a deck or fence and didn’t want to pay crazy COVID prices, now could be the time to build (despite paying high labor costs).


TOPICS: Society
KEYWORDS: crash50; fed; lumber; lumberprice; prices
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To: Does so
"..Vacations? With gas increasing 5¢ a gallon every day?."

Nobody said they were going anywhere.. d;^)

21 posted on 06/04/2022 5:21:57 AM PDT by CopperTop (Outside the wire it's just us chickens. Dig?)
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To: Data Miner
I bought this for $7.88/sht a few years ago


22 posted on 06/04/2022 5:35:41 AM PDT by Pollard (If there's a question mark in the headline, the answer should always be No.)
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To: FreedomPoster

“The president’s economic plan, as we see it, is working.”

WH PoS Karine Jean-Pierre, 6/1/2022

https://www.whitehouse.gov/briefing-room/press-briefings/2022/06/01/press-briefing-by-press-secretary-karine-jean-pierre-june-1-2022/


23 posted on 06/04/2022 6:50:26 AM PDT by logi_cal869 (-cynicus the "concern troll" a/o 10/03/2018 /!i!! &@$%&*(@ -)
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To: blam
since the Federal Reserve embarked on its most aggressive interest rate tightening campaign in decades

Not buying that. FED rates has only moved up by 1/4, 1/4, 1/2. That isn't enough to even touch the 8+% official inflation rate (which is probably closer to 16%).

More likely, demand has dropped, causing prices to drop. Mortgage rates have about doubled in the last 6 months, from around 2.5% to 5%. That has several hundred $$dollars to the monthly payments.


24 posted on 06/04/2022 7:08:35 AM PDT by TomGuy
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To: logi_cal869

Since their plan is to attempt to derail the US economy and put millions in a bread line, of course they claim it’s working. It’s just not working for the good of the Republic, though.


25 posted on 06/04/2022 7:08:54 AM PDT by curious7
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To: blam

Just got a sheet of plywood. It’s 2x what it was 3 yrs ago.


26 posted on 06/04/2022 7:17:23 AM PDT by lurk (u)
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To: SaveFerris; Chode; SkyDancer; Salamander; carriage_hill; Lockbox; MtnClimber; nascarnation; ...

Unicorn!!! Don’t forget the Unicorn 🦄

I just made a simple shelf to put a CPU, Modem and Router on. 1 pine 1 x 12 x 6 and 1 pine 1 x 3 x 6 cost $33 freaking bucks !!!!


27 posted on 06/04/2022 8:20:43 AM PDT by mabarker1 ((Congress- the opposite of PROGRESS!!! A fraud, a hypocrite, a liar. I'm a member of Congress !)
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To: Pollard

I use to buy “cheap” osb for crating metal parts. For years it was $5 plus or minus a dollar. It went from that to $68 a sheet seemingly overnight.


28 posted on 06/04/2022 8:25:07 AM PDT by Organic Panic (Democrats. Memories as short as Joe Biden's eyes)
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To: curious7

Yup.

All according to plan.


29 posted on 06/04/2022 8:28:37 AM PDT by logi_cal869 (-cynicus the "concern troll" a/o 10/03/2018 /!i!! &@$%&*(@ -)
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To: mabarker1

Yikes 😳


30 posted on 06/04/2022 9:32:39 AM PDT by SaveFerris (The Lord, The Christ and The Messiah: Jesus Christ of Nazareth - http://www.BiblicalJesusChrist.Com/)
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To: mabarker1

these price swings wreak havoc on builders and construction loans...


31 posted on 06/04/2022 11:19:02 AM PDT by Chode (there is no fall back position, there's no rally point, there is no LZ... we're on our own. #FJB)
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To: logi_cal869

No-nothing out of touch affirmative action hire.


32 posted on 06/04/2022 1:24:41 PM PDT by FreedomPoster (Islam delenda est)
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To: mabarker1

It’s going to get much worse; watch for the housing bubble to burst this Summer, as milled wood becomes all but unaffordable, and building comes to a near halt. A lot of related industries and cottage industries will be severely affected. Noah would be PO’d that his Ark isn’t getting completed. Heh.


33 posted on 06/04/2022 3:02:51 PM PDT by Carriage Hill (A society grows great when old men plant trees, in whose shade they know they will never sit.)
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To: BiglyCommentary

This is saying costs for lumber have gone down 51% due to FED raising rates. That means mortgages are higher cost and it will adversely affect the housing market. The insanely inflated real estate bubble is about to burst. I hear most brokers are expecting this to happen in last quarter of this year.


34 posted on 06/04/2022 9:42:23 PM PDT by antceecee
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To: antceecee

Go look at a chart of lumber prices for the last 2 years. Wildly swinging up and down for a variety of reasons.


35 posted on 06/04/2022 10:07:27 PM PDT by BiglyCommentary
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To: BiglyCommentary

Yes. I sell wood product for a Wisconsin company. Pricelist was withdrawn 2 yrs ago and they quote per daily costs.


36 posted on 06/04/2022 10:33:27 PM PDT by antceecee
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To: SaveFerris

And that’s not even painted/stained.


37 posted on 06/05/2022 8:33:10 AM PDT by mabarker1 ((Congress- the opposite of PROGRESS!!! A fraud, a hypocrite, a liar. I'm a member of Congress !)
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To: Chode

Yup


38 posted on 06/05/2022 8:33:41 AM PDT by mabarker1 ((Congress- the opposite of PROGRESS!!! A fraud, a hypocrite, a liar. I'm a member of Congress !)
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To: carriage_hill

Well I guy that was My project for the decade...


39 posted on 06/05/2022 8:34:47 AM PDT by mabarker1 ((Congress- the opposite of PROGRESS!!! A fraud, a hypocrite, a liar. I'm a member of Congress !)
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To: carriage_hill

guy=guess


40 posted on 06/05/2022 10:48:36 AM PDT by mabarker1 ((Congress- the opposite of PROGRESS!!! A fraud, a hypocrite, a liar. I'm a member of Congress !)
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