Lumber prices😳

[giles]

What is going on and how do we fix it?

Lumber Prices Are Staying Sky High — Even If The Pandemic Ends Soon

Some types of lumber are selling at all time highs, adding tens of thousands of dollars to the price of a new home and home projects. The pandemic has caused supply disruptions and heightened demand.

www.npr.org

Construction is about to stop. How long till it recovers? How does this change things in your future?

 

[giles]

Read up if you work construction or are planning a construction project..

The price of lumber is up 193%—and about to spike even higher

"It’s clearly a short squeeze."

fortune.com

 

[jagermeister]

So glad I got the framing done when I did. Now I feel like I got a bargain at $6.50 two by fours.

 

[at1010]

Interesting read -

I think this is simply a function of Supply and Demand....you want lumber or to build - you are going to pay for it. I also think that many are willing to pay more for a home, than pre-pandemic, for various reasons.

As pricing increases per SQ and you reduce the number of families that can afford that price per SQ in the overall market - therefore driving down the number of available buyers at that premium price point - the price will work itself back down.

Lumber does have a shelf life (not sure what it is but sure that it is regulated by some org) and no mill or distributor is going to be willing or able to carry the cost of inventory for any substantial amount of time, once the premier home buyers and high-end home renovations market is well saturated at the higher price point, and the volume is not moving like they have been able to get away with recently - they will lower the pricing to increase purchases.

Unless there is some major recession coming that is going to disrupt a large number of American's take-home income, I really don't think this is going to have any major impact on the middle to the long-term American family. Of course, if you are in construction right now, I am sure this is frustrating but I also assume the business is busy as hell too - double edge sword, I suppose.

Like any market, whether it be micro or macro, there are vicissitudes that occur throughout the life-cycle.

PS: I tend to be an optimist and not read into the "sky is falling" type media publications that seem to plague us today, however the above is all just my opinion and I could be WAY off.

AT.

 

[giles]

So glad I got the framing done when I did. Now I feel like I got a bargain at $6.50 two by fours.

Yup! Shut it down folks, this game is over.

 

[bowhunter1023]

Nothing we can do to stop it. Give it 18 months and it'll come back to a new "low", but 2x4s will never be $3 again and OSB will always be $15+. I don't have time at the moment to give an economics lesson, but this is basic supply and demand exacerbated by Trump's tariffs and a global pandemic. This is what happens when "just-in-time" manufacturing runs into a 1,000 car pile up on the highway.

 

[giles]

Interesting read -

I think this is simply a function of Supply and Demand....you want lumber or to build - you are going to pay for it. I also think that many are willing to pay more for a home, than pre-pandemic, for various reasons.

As pricing increases per SQ and you reduce the number of families that can afford that price per SQ in the overall market - therefore driving down the number of available buyers at that premium price point - the price will work itself back down.

Lumber does have a shelf life (not sure what it is but sure that it is regulated by some org) and no mill or distributor is going to be willing or able to carry the cost of inventory for any substantial amount of time, once the premier home buyers and high-end home renovations market is well saturated at the higher price point, and the volume is not moving like they have been able to get away with recently - they will lower the pricing to increase purchases.

Unless there is some major recession coming that is going to disrupt a large number of American's take-home income, I really don't think this is going to have any major impact on the middle to the long-term American family. Of course, if you are in construction right now, I am sure this is frustrating but I also assume the business is busy as hell too - double edge sword, I suppose.

Like any market, whether it be micro or macro, there are vicissitudes that occur throughout the life-cycle.

PS: I tend to be an optimist and not read into the "sky is falling" type media publications that seem to plague us today, however the above is all just my opinion and I could be WAY off.

AT.

I would say that a lot of that middle America is construction driven careers.

 

[bowhunter1023]

Real quick before I get back to the fam, the Feds dumping massive piles of cash into infrastructure is creating another issue and that's construction pricing and availability. When the Feds pump money into public infrastructure projects, it inflates construction pricing across the board.

 

[Jackalope]

I was listening to a show yesterday that was talking about the primary reason for the lumber price increase was the cost of transport. Trucking companies are having a hard time buying trailers, truck parts, tires and basically everything to do with the cost of operating a transport business. The biggest is trailers because of the cost of raw materials to build them and then the companies that do have been impacted by covid and labor shortages.

 

[giles]

I need to stop reading and step away for a minute. I'm freaking myself out.

 

[Jackalope]

Nothing we can do to stop it. Give it 18 months and it'll come back to a new "low", but 2x4s will never be $3 buck again and OSB will always be $15+. I don't have time at the moment to give an economics lesson, but this is basic supply and demand exacerbated by Trump's tariffs and a global pandemic. This is what happens when "just-in-time" manufacturing runs into a 1,000 car pile up on the highway.

On just in time manufacturing. Notice how almost everything comes completely disassembled now. Previously you may have to put a couple pieces on to complete the assembly which they did to save shipping and packing space. Now it's individually wrapped pieces straight from the manufacturer and put in a box for you to manufacture the finished product.

 

[at1010]

I would say that a lot of that middle America is construction driven careers.

I don't have much to say as I have no idea about the statistics of construction-related industries and the number of people impacted. However, would be more worried about the economic situation if it read "cant give lumber way, price is dropping, no new homes are being built, etc."

This is simply a logistical log jam.

I work in the PPE industry and we are seeing it on various items as well - nitrile gloves went through the roof for a while! The pricing was outrageous and there were folks who gouge pricing bad. As more mfgs. got into the market and the pandemic eased, supply increased and pricing slowed.

Even if we could say this was a long-term situation and that the pricing would be fixed at this new highest ever price point- it simply would open up a part of the market that would be likely attacked by a substitute at equal or lesser pricing, for example, a composite material. Right now another material might not be affordable but if the pricing gets high enough and economies of scale can be justified, alternatives always find a way!

If you don't want to build now, just wait......it'll come back to more normal pricing. However, you also are going to have to assume inflation so even if it takes 3 years to come down x standard inflation (2.2 over the past decade) - you are still looking at a 6% increase from what lumber sold pre-pandemic. That is extremely conservative and most likely will be far higher but still less than during the panic buys of today.

 

[bowhunter1023]

6% is incredibly optimistic, but I hope you're right. I've heard as much as 25% as the new normal across a variety of sectors and commodities.

 

[Fluteman]

I'll tell you, I'm glad I was fortunate enough to build two years ago. Prices are ridiculous right now. I've been working on the old garage on the farm doing upgrades. Finished electrical and now I'm building shelves. Bought 18 2x4s and 2 sheets of 3/4" plywood, and had $275 in lumber. Hell, I could have bought two of the heavy duty metal shelves for the same price.

Dad called me last week. He had some timber guys come on him last year and harvest about a dozen Walnut trees. They left a few that rolled over the hill, so he dragged them up out of the holler and took them to the mill. All were roughly 12" in diameter, two where 10' long, and 1 was 12' long. They wrote him a check for $550. Guy working there said he's never seen prices this high on Walnut before.

 

[at1010]

6% is incredibly optimistic, but I hope you're right. I've heard as much as 25% as the new normal across a variety of sectors and commodities.

Yes, sir! I agree - I was just trying to say even if all variables stayed the same, just with inflation alone you'd be able to justify a 6-7% price increase. Now figure increased fuel, demand, etc. pricing will go up. Hopefully, people's salaries increase commensurate with the price increases over the next 10 years.

As I mentioned, with all the craziness in this world - I don't think this is the thing to get to worked up about. Just my opinion.

 

[bowhunter1023]

I respectfully disagree, Al. These prices are shutting down reshoring efforts before they ever get off the ground. Locally, I have 3 companies in growth mode that can't grow because they don't have enough space, but can't afford to absorb a 100-300% increase in the cost of materials. One such company just saw a 100% increase across the entire cost of an expansion project and they pulled the plug. If we can't recover to normal pricing in 12-18 months, this will have catastrophic effects on our manufacturing and construction industries in the form of more globalization as giant multinational corporations gobble up the small to mid-sizs companies that lack the capital to keep up with inflation.

 

[Buckmaster]

Domestic steel prices have gone up 6-15% since January. On May 1 we are expecting similar increases. Scrap prices, market shortages, and transportation are the root causes in the USA.

 

[giles]

Maybe I'm a little more in touch because I've watched a lot of people get put out of a job in the last week. With more to come. 18 week turnaround would be hard on them, 18 months is life changing. I fall into this also. The mental prep of selling my house has started. So this is very real to me and worth worrying about.

 

[Quantum673]

Lumber commodities were trading in the $200 to $300 per 1000 board ft before the pandemic. They are $1000 per 1000 board feet now. Everything I have read up on says that it will never be sub $500 per 1000 board feet. Most experts have said $800 will be the new norm.

Now we are seeing metal sky rocket. It will be a long time before we ever get close to anything normal again.

 

[at1010]

I respectfully disagree, Al. These prices are shutting down reshoring efforts before they ever get off the ground. Locally, I have 3 companies in growth mode that can't grow because they don't have enough space, but can't afford to absorb a 100-300% increase in the cost of materials. One such company just saw a 100% increase across the entire cost of an expansion project and they pulled the plug. If we can't recover to normal pricing in 12-18 months, this will have catastrophic effects on our manufacturing and construction industries in the form of more globalization as giant multinational corporations gobble up the small to mid-sizs companies that lack the capital to keep up with inflation.

No worries at all! I respect your acumen and knowledge of the industry.

I just don’t see this not being fixed in the next 18-24 months. Which in the life is a business - is on the short business plan.

Companies want to expand and grow because demand for various product categories are up and they want to make more. Yet, they want to pay pricing for things that pre dated their now increased business volume.

I am in manufacturing myself and I see the picture you’re painting clearly. I personally just think markets tend to be more resilient than often the picture the media paints.

So many industries have stayed alive through similar challenges. The print industry is one that comes to mind.