Posted on 06/13/2021 6:22:35 AM PDT by blam
Lumber futures on Chicago Mercantile Exchange posted their largest-ever weekly loss, extending a multi-week decline as sawmill output increases and buyers hold off on purchases, according to Bloomberg.
On Friday, lumber futures fell 5.61% to $1,059.20 per thousand board feet. For the week, prices plunged 18%, the most significant decline since 1986, one year before the 1987 stock market crash.
Lumber prices have crashed 40% from the record high in May of around $1,711.
Lumber prices have catapulted into the stratosphere in the last year, hitting renovators, home builders, buyers, and anyone else extremely hard. The National Association of Home Builders (NAHB) has noted lumber prices have added at least $36,000 to the costs of a new single-family home.
For the last several months, we have warned about the pernicious effects of soaring prices on consumers. For instance, the University of Michigan economic sentiment survey shows the number of people who say it’s a good time to purchase a house has collapsed as the price of lumber, copper, concrete, roofs, labor, land, and almost everything scream higher. Shown below is the survey matched up against NAHB’s survey (a homebuilder survey that rates market conditions for the sale of new homes) and lumber prices. It’s easy to spot as lumber prices soared, the homebuyer sentiment survey crashed.
In another way, home buying intentions on a monthly change have plunged to the lowest levels in two decades.
This confirms what we noted earlier, namely a record divergence between crashing homebuyer confidence (due to record home prices) and soaring homebuilder confidence (also due to record home prices). Guess which one will matter in the end.
As buyers balk at unprecedented lumber prices, sawmills appear to be catching up with the demand that has been fueled by massive home-building demand in North America (thanks Powell) and so-called “supply shortages” at lumberyards.
“Activity yesterday was brisk to start, turned lethargic and ended quite subdued,” William Giguere, who buys and sells eastern spruce with mills for Sherwood Lumber in Massachusetts, wrote in a note Friday.
“There was plenty of lumber available from the mills and enough ambition to sell. Missing was the sense of urgency from buyers.”
U.S. lumber production has increased 5% over the past 12 months to meet the new demand, according to Domain Timber Advisors LLC, a subsidiary of Domain Capital Group, in Atlanta, Georgia, which adds another increase of 5% is coming soon, or roughly 1 billion board feet.
Even as lumber prices pull back from stratospheric highs, BMO Capital Markets warns that prices may not return to pre-pandemic levels any time soon.
“‘Nosebleed’ prices won’t last, but strong demand, a limited supply response and a rising cost curve all point to above-trend prices for at least the next 12-24 months,” BMO analyst Mark Wilde wrote in a recent note.
Devin Stockfish, the CEO of Weyerhaeuser, one of the top lumber producers in the U.S., said lumber prices over $1,000 aren’t expected to continue. He spoke at a recent Nareit conference but added home-building and renovation boom could keep lumber prices somewhat elevated.
“I don’t think $1,000 lumber prices are the new normal,” Stockfish told the conference.
“With that being said, when you think about the amount of housing we’re going to have to build in the U.S. over the next three, five, 10 years, that’s a significant amount of demand for wood products.”
Meanwhile, Capital Economics commodities analyst Samuel Burman told clients a couple of months ago that lumber prices may tumble to $600 even as demand for the commodity remains robust due to increasing supply. Even at $600, it’s nearly double the prices from 2016.
“Even though we expect lumber demand to hold up well for some time, we still think that a rebound in supply will lead to a sharp fall in the price of U.S. lumber over the next eighteen months,” Burman wrote.
So clearly, explosive inflation in lumber prices likely topped out prices around $1,700 as supply now floods the market even as demand remains robust.
In terms of output, the lumber industry is controlled by just a handful of firms, including Weyerhaeuser Co., Georgia-Pacific LLC, West Fraser Timber Co., Ltd., among others, which makes it easier for capacity to be controlled. It makes you wonder if the lumber shortage was artificially induced.
Building houses for who? Illegals flooding in?
Hmmm… private enterprise, the market and supply-and-demand working their “magic”.
Good news. We have 3 bocce courts w/ 4x6 pressure treated boards in the next few weeks. More profit for us.
Building houses for all in the world who want to escape their crap hole and come and make the US a craphole.
“With that being said, when you think about the amount of housing we’re going to have to build in the U.S. over the next three, five, 10 years, that’s a significant amount of demand for wood products.”
Building houses for who? Illegals flooding in?
—
More like hedge funds such as Black Rock which is buying up entire subdivisions of homes to use as rentals. They paid over-ask, because the government gave them billions in funds as part of the Covid emergency spending, so cost is not an object.
Destroy the opportunity for families to own their own home; all part of the globalist’s plan of destroying the middle class. Welcome to 21st Century serfdom.
https://www.foxnews.com/media/blackrock-investment-firms-killing-dream-home-ownership
Buying too soon, and hoarding, sometimes works against you....
Canadian production of lumber was down 7% in 2020 vs 2019, while the US production was steady:
Both Canada and US up substantially for 2021:
How do you get crazy quadrupling prices?
Someone was eating up a lot of wood.
It wasn’t housing starts.
It wasn’t people building outdoor decks and fixing up their houses.
It wasn’t termites.
“Lumber futures on Chicago Mercantile Exchange posted their largest-ever weekly loss, extending a multi-week decline as sawmill output increases and buyers hold off on purchases,...”
Once again the immutable law of supply/demand shows itself.
Meanwhile the illegitimate administration is once again locking up western state timber lands and arbitrarily expanding National Forest boundaries (with off limits for humans provisions) and canceling timber contracts.
Blackrock is effectively you and I through our 401k and IRAs, you realize? And they aren’t buying that much in the scheme of things. Only 1 in 5 properties are bought as investments nationwide and most of those are bought by folks like myself. Besides, in a normal market supply will increase to offset price increases - lumber going back down will help that effort, as will labor post reduction in extra unemployment. Lastly, less regulation on residential construction would help as well.
Gosh supply and demand still works
Just a round-about way to nationalize industries. All that Section-8 housing money? Why should it go to independent housing owners?
When gov’t pays for “obamaphones”, who gets the money? When gov’t pays people not to work, where do they spend it?
Who pays big money to lobby for big regulations to keep out the small fry? (The revolving door of private-public-private jobs).
No wonder all the big corporations & their CEO’s bend far left. That’s where the freebie money flows.
DemocRats fleeing the sewers they turned all cities into, spreading the contagion
No. Globalist monopolistic in action
Just because stockmarket prices have dropped doesn’t mean that drop has shown up on store shelves.
Our birth rate has plummeted. Our population is aging and stagnating; as have wages since 1970, after adjusting for inflation.
Who is buying all these phantom houses?
Comforting
govt funded housing for illegals; aka projects in sfh zones
...and using water and energy...
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.
