Posted on 06/17/2021 3:46:05 PM PDT by blam
Earlier this month, we told readers, “Lumber Prices Slump As Historic Boom Hits A Wall,” as sawmills were catching up with the flurry of demand from North American homebuilders amid supply chain issues, which created massive supply constraints, which propelled lumber prices to record highs.
Ole Hansen, Saxo Bank’s chief commodity strategist, said the plunge in lumber prices might spiral down some more as speculators exit their positions and supply catches up with demand.
Lumber futures on Chicago Mercantile Exchange are down more than 2% on Thursday. Prices have fallen 44% since May’s record high of over $1,700 per thousand board feet, although prices remain 282% higher than the lows seen in early 2020.
The chart below of lumber prices appears to be a classic “commodity blowoff top.”
Last week, lumber futures fell 18% in the most significant weekly decline since 1986, one year before the 1987 stock market crash.
Hansen said there was are several factors that suggest prices may fall further.
“Something like lumber has been very much a pandemic-driven spike,” he told Bussiness Insider, adding that sawmill capacity wasn’t able to keep up with supply as “people went crazy in their backyards, redoing their houses or buying a bigger house” that caused prices to soar.
In addition to the physical market, speculators such as hedge funds are puking their long positions as prices continue to waterfall, he added.
“Some of that activity is bound to slow [and] supply is starting to meet the demand,” he noted.
Hansen pointed out the curve for lumber futures is sloping downwards and suggests that “the market is looking for quite some weakness as we head into the autumn and winter months.”
Weakness in lumber prices in the second half could offer relief for homebuilders who’ve been stunned by skyrocketing costs. This week’s latest housing report showed May permits plunged to the lowest level since October. The chart below suggest surging costs are halting new construction.
Besides homebuilders, home buying intentions among consumers are at the lowest in two decades as lumber and other costs push housing prices to unaffordable levels.
After the multi-day Federal Open Market Committee meeting, Fed chair Jerome Powell briefed reporters Wednesday and said inflation would prove to be temporary.
“The thought is that prices like that, that have moved up really quickly because of shortages and bottlenecks and the like, they should stop going up. And at some point, they, in some cases, should actually go down. And we did see that in the case of lumber,” Powell said.
However, even as lumber prices correct from stratospheric highs, BMO Capital Markets warns that prices may not return to pre-pandemic levels any time soon.
That’s good.
Is Blackrock still buying houses for >25% over list?
Yes
I don’t know, but I’ve been wanting to extend the back deck into a lower party deck so I can put a hot tub in for purely scientific reasons.
The prices have been so bad I haven’t even fixed some basic stuff like fencing.
Although occasionally I like to flex my wealth and shoot at my 100 yard target which is backed with OSB. *flex*
“This week’s latest housing report showed May permits plunged to the lowest level since October. The chart below suggest surging costs are halting new construction.”
“home buying intentions among consumers are at the lowest in two decades as lumber and other costs push housing prices to unaffordable levels.”
bidenomics fuchs construction workers as well as renters wanting to own their own homes ... of course, when dwelling prices skyrocket so does rents, so renters are double-fuched ...
Good because hurricane season is coming up and people need plywood.
Nothing short of mania seems to govern the market this last half decade. We are just limping out of a self made depression and copper and lumber went to new highs? Doesn’t make sense. My financial advisor wondered what I thought and I said I just can’t invest in equities or real estate right now. Just doesn’t make sense.
Most this lumber problem is artificially caused by the 5 or so major Lumber companies. Loggers haven’t got a raise. Lumber yard margins are still the same, mills, and transportation people aren’t making more money.
But Corporate lumber profits are going through the roof.
Bkmk
Say it three times fast:
Lumber bubble bursts
Lumber bubble bursts
Lumber bubble bursts
Been trying to get replacement windows for MONTHS.
BTW..hello, Leland (my fave talker.) I know you are reading our threads. 😊
Yup
Rents have to go up
Lots of landlords are paying mortgages that can be impacted
It would have been nice if there was a way to go to Home Depot, Lowes, or lumber supply, show a card and get the normal prices.
While the home builders, slamming up home after home after home, to accommodate the massive liberal invasion into the suburbs, have to continue to pay through the nose.
You have a backyard target???
I am so jealous…..
as well as renters wanting to own their own homes ...... if Wall St, hedgefunds and companies like Blackrock have anything to do with it, there won’t be any homes for renters to buy.
BlackRock owns America’s homes — and a whole lot else
I’ve said many times, the cure for high prices is high prices. Producers scramble to produce, buyers buy less or hold off, and prices start falling.
Out to 2500 yards, yes. You’re welcome to come try it as long as you’re a real American and not a closet liberal lover heh.
It’s amazing how people are amazed at the interplay of supply and demand.
They can give you a thousand reasons why things don’t make sense or are too high or detached from reality or too low (wages, or whatever they are selling) or secret central bankers etc. but supply and demand never crosses their lips.
If you can shoot out on your yard like that you're a wealthy man - no matter how much or little money you have.
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