so you get a homebuild loan for $XXX and then materials goto $XXX*X, now what?
Posted on 06/09/2021 9:29:36 AM PDT by Heartlander
If, like me, you went to purchase lumber within the past few months for your garden, shelves, or other home projects, you found yourself paying through the nose for materials—or else putting off the work in hopes of lower prices in the future. It's even worse if you're a awaiting a new home, since expensive lumber is adding tens of thousands of dollars to the price of building the average house. You can blame pandemic-era lockdowns, tariffs, and other government interventions in the market for much of the pain—and officialdom proposes to make things worse.
"Soaring lumber prices that have tripled over the past 12 months have caused the price of an average new single-family home to increase by $35,872," the National Association of Homebuilders warned in April. "This lumber price hike has also added nearly $13,000 to the market value of an average new multifamily home, which translates into households paying $119 a month more to rent a new apartment."
Prices have recently come down a hair, but lumber is still at over $1,400 per thousand board feet, compared to a bit over $400 per thousand board feet a year ago. The problem has multiple causes, finds an analysis in ConstructionDive, a trade publication, including public health mandates that shuttered or restricted many sawmills even as people confined at home turned to DIY projects that required materials. More demand for reduced supply inevitably spikes prices.
Even before the pandemic, though, 30 large mills permanently closed their doors because of the Great Recession, according to the U.S. Forest Service. That mess resulted from foolish regulatory interventions in the financial markets, with a particularly large impact on the housing industry.
"[W]e identify a potent mix of six major government policies that together rewarded short-sighted collective risk-taking and penalized long-term business leadership," wrote the University of Michigan's Mark J. Perry and commercial real estate banker Robert Dell in 2010. "[T]he banking crisis should be understood more fundamentally as a government failure than as a market or business failure."
Rising lumber prices would seem to be a good incentive to restart those mills, but it's not that easy. "[T]here isn't enough labor to work the sawmills that are open at full capacity," notes ConstructionDive, with expanded unemployment benefits shouldering much of the blame. "A truck driver shortage, plus higher diesel fuel prices, also mean that it's less profitable for timber owners to ship logs to sawmills."
That leaves domestic production of lumber lagging behind demand, with prices rising as an inevitable result.
So, what about imported lumber? The United States, after all, isn't the only country to grow and harvest trees. But idiotic government trade restrictions stand in the way of alleviating high lumber prices in the U.S. with products brought in from elsewhere.
"Amid surging lumber prices that are already adding an average of $36,000 to the construction cost of new homes, the Biden administration is moving forward with plans to double tariffs on lumber imported from Canada," Reason's Eric Boehm reported last week.
While former President Donald Trump is often rightly criticized for his protectionist policies, and did, in fact, impose a 20 percent tariff on Canadian softwood lumber in 2017, his administration slashed that duty to 9 percent last year as lumber prices soared. The Biden administration, on the other hand, proposes to hike tariffs once again, to over 18 percent for many firms, based on the premise that Canadian producers "made sales of subject merchandise at less than normal value" (we should be so lucky).
"It is a particularly egregious move, seeing as how lumber prices are still near multi-decade highs (still, despite a recent dip, up over 300% from one year ago) and US timber firms remain unable to sate demand," points out Peter C. Earle of the American Institute for Economic Research. "The increased costs will ultimately fall upon American citizens in the form of higher prices and decreased availability of goods and services."
That is, in the midst of soaring prices and short supply of lumber in the United States, the federal government is doing everything in its power to choke off other sources of the stuff that might fulfill demand and help to bring down costs.
In fact, it's easy to see the U.S. government's mistreatment of the market for lumber—not just the industry itself, because the impact falls heavily on consumers far removed from timber growers and sawmills—as a horrifying example of officialdom's overall economic incompetence. Through poor financial policy, the government reduced the number of domestic suppliers. With tariffs, it raised the price of imported lumber for American consumers, further restricting their options. Then governments imposed pandemic measures that hobbled many sectors of the economy, sawmills included. The federal government also offered expanded unemployment benefits, incentivizing people to not take jobs, making it difficult to expand production and virtually impossible to bring mothballed sawmills back online. And now the Biden administration wants to further hike tariffs that will make imported products more expensive.
If you deliberately set out to hurt Americans through this one sector of the economy, you couldn't be more effective. But this is government we're talking about here, which makes the premise of Hanlon's razor (framed earlier and slightly differently by Robert A. Heinlein) more persuasive: "Never attribute to malice that which is adequately explained by stupidity." What government officials and their ill-considered policies have done to the lumber industry is mind-bogglingly stupid.
Unfortunately, the results of government mistreatment of the lumber market go beyond stupidity to impose massive expense, as any home handyman or building contractor will attest. Lumber prices will eventually come down (maybe sometime in 2022 as supply rises to meet demand) but not until much of the public is paying a high cost for the results of policy mistakes. When government officials fumble around with things they don't understand while pretending they're making improvements, they leave the rest of us picking up the tab for the breakage—especially when they break the economy.
Pssst. the government wants inflation. It monetizes the debt.
That aphorism was more persuasive pre-Marxist America. In today’s political climate we can reasonably attribute this state of affairs to malice.
The author is late to the game. In recent days the price of lumber has been declining-—maybe not yet at Home Depot, but on the futures exchange it has.
Malice is a perfectly acceptable explanation for me. There is something that stalks the land that goes about cloaked, but with a total loathing for anything that is part of the American Spirit, and if they can, they get get leverage on some commodity or service, causing it to be jacked up far beyond any plausible market fluctuation, and thus create even a small degree of uncertainty, if not a wider chaos.
Life becomes a crap shoot as we descend ever further into dystopia.
As it devalues the dollar. Soon, a 100 dollar bill will buy a gallon of gas.
You’re not wrong. They hate us.
I love a good crap shoot though, I’m an excellent shot heh.
> Pssst. the government wants inflation. It monetizes the debt. <
The Federal government (D and R alike) has painted itself into a corner. As you noted, the only way they can begin to pay off the debt is with inflated dollars.
But I’m guessing we’ll see higher interest rates too. That will make it expensive for Congress to borrow more money. (And they will borrow more, regardless.)
Where’s Calvin Coolidge when you really need him?
Just a blurb on TV that our local produce prices have gone up 400% since Biden took office. Plus we’ve having shortages again—meat and dairy among others.
Soon, a 100 dollar bill will buy a gallon of gas.
so you get a homebuild loan for $XXX and then materials goto $XXX*X, now what?
Good to hear. One section of the hardwood flooring in my living room needs to be replaced, and I was very concerned about both prices AND availability.
“While former President Donald Trump is often rightly criticized for his protectionist policies”
Protectionist policies. The battle cry of the true libertarian. Screw America First, we’re just one big worldwide marketplace.
The leftist will be dumped soon enough and neutered next year.
There was a great video I saw that talked about using inflation to your advantage.
The idea is that BEFORE it takes off, refinance your home with a really cheap FIXED RATE loan and pay as little as possible on it. Then, when inflation is going to the moon, take a marble off your desk and sell it to a little kid for inflated dollars, then pay off your house with those dollars.
When it took a wheelbarrow load of marks in Germany to buy a loaf of bread, that same wheelbarrow could also have been used to pay off an existing fixed rate loan made before the inflation kicked in.
Substitute "Economies are" for "Technology is":
"Technology is dominated by two types of people: those who understand what they do not manage, and those who manage what they do not understand." ~ Putt's Law
Call it nully's Law, if you must...
That happened a few months ago too, but we never saw it at the retail outlets. And then it went up again.
But yes. I need to frame the walls in my new “pole barn” shop but I’m holding off on buying the lumber until this thing passes. I don’t need to finish it that bad, so I’m not paying top dollar to do it.
"Hanlon's razor (framed earlier and slightly differently by Robert A. Heinlein) more persuasive: "Never attribute to malice that which is adequately explained by stupidity.""
IIRC, Heinlein said "Never attribute to malice that which can be adequately explained by stupidity, but don't rule out malice!"
Something I saw at my local lowes is weird, and it’s true today. A 2x4x10 is $14.16, but a “SEVERE WEATHER” treated 2x4x10 is $.60 CHEAPER.
The word from day one was that treated lumber is what is getting hammered. Apparently not now.
https://www.lowes.com/search?searchTerm=2x4x10
I don’t believe the excuse that mills closed in 2008, I don’t believe the excuse that mill workers were not working due to Covid, and I don’t believe the excuse that people built too many home outdoor decks.
I’d bet that the production of lumber over 2020 and YTD 2021 has been at least the same as 2019, probably even more.
That would mean that someone is buying a lot of wood that was not before.
It’s not industry, they are not building twice as many houses.
Only nation states could buy that much wood.
And it’s not hard to figure out. People that work in the industry would know, but I haven’t seen a report on it.
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