Any chance of construction lumber prices going down in six months?

[Andrew More]

I can tell you that nobody knows.

This is correct answer. FWIW, lumber prices bounce around a bit anyway, it's just generally smoothed out by the big box stores, via various contracts and the like. I know even after lumber had gone through the roof Menards was still selling it at regular prices. I'd expect a similar lag time on the way down, assuming it ever goes down.

lumber-futures-2021-03-14-macrotrends.png

This is a 5 year chart, and you'll notice we've had some spikes, most notably in 2018. It also seems like it spikes whenever there's a large natural disaster, like a hurricane.

People ask how can 1400 dollars or 2000 dollars in someone's hands create inflation ? The reality is the recipients are only possessing that money for a very short time. After they get it, who gets it next ? Who gets it after that?

This is the other element. A wise man once said that if you can predict inflation, you'd be wealthy beyond the dreams of Midas. Right now there are a few competing forces which are determining if we're going to get inflation, deflation, or something in between.

The big questions are:
1) is this enough to fill the hole in the economy caused by the lockdowns?
2) what will happen with this money once it's in people's hands? If you spend it, and so does the next person and the next person the velocity of money increases, making more money in the system, causing inflation. If people just gamble it away, or put it into a mattress the velocity of money drops, and there is deflation. For the past 10 years the velocity has been decreasing, and it fell off a cliff during the pandemic. Survey's have also indicated that people are paying down debt, and gambling on the stock market, both of which are not inflationary.

In this particular market, it's also a question of what the housing market will do. Having a rising housing market in the midst of a recession is a little nuts. Having one with so little supply even more so. However, there are also record numbers of people unemployed, with a record number of mortgages in forebearance, which might move into foreclosure when the music stops. Massive numbers of homes in foreclosure will fix the supply issues, in addition to being massively deflationary.

So, once again, nobody knows what's going to happen. I'd guess that it's likely prices will be elevated for some time, and the longer they stay up, the more likely they are to stay that way.

[Jeff Ramsey]

Today I paid $8.50 for one .... ONE fir 2x4x8' !!!!!

[Ron Citerone]

I wonder how much demand is due to new construction and how much is due to additions/renovations?

[Robert Hayward]

Today I paid $8.50 for one .... ONE fir 2x4x8' !!!!!

I could not believe a 2X4 could cost that much. So I went online to my local HD. Standard construction grade was $6.75 and PT was $10.00 and change! Then came across this in the picture below!

[David Bassett]

I wonder how much demand is due to new construction and how much is due to additions/renovations?

I have no idea overall, but we were talking to our contractor about a list of several small maintenance projects around our house. (Beyond my skill set or too physical for me these days.) They initially said they had work but weren't too busy, when our estimate didn't arrive on time my wife called. They apologized and admitted they'd forgotten our job. I'm guessing the insurance money started coming in from a local fire, one of the smaller of the recent CA fires, and they were slammed with about a dozen complete rebuild or replace lost houses in the hills above us. So here, it seems to be neither, but rather the natural disaster theory suggested above.

[Eric Anderson]

The Canadian softwoods tariffs is I believe 30%. So if Pres Biden eliminates this ridiculous tariff that might help to bring down prices and increase supply of Canadian softwoods coming into the US. On fuel prices, this is two fold. A number of Texas Gulf coast refineries went down in the storm due to freezing and electrical blackouts. This seriously disrupted supply of diesel and premium fuels. Also Russia and OPEC are manipulating global supply to try to get prices up. I suspect that we'll see oil stabilize at about $65/bbl. And BTW, there is really nothing any president or congress can do to change oil pricing as oil pricing is completely dependent on international conditions.

[Steve Rozmiarek]

The Canadian softwoods tariffs is I believe 30%. So if Pres Biden eliminates this ridiculous tariff that might help to bring down prices and increase supply of Canadian softwoods coming into the US. On fuel prices, this is two fold. A number of Texas Gulf coast refineries went down in the storm due to freezing and electrical blackouts. This seriously disrupted supply of diesel and premium fuels. Also Russia and OPEC are manipulating global supply to try to get prices up. I suspect that we'll see oil stabilize at about $65/bbl. And BTW, there is really nothing any president or congress can do to change oil pricing as oil pricing is completely dependent on international conditions.

Construction lumber prices are up over 100%, when the production in north america shut down, as did the supply chain, for most of 2020, we get what happened. The tariff had very little to do with it, there is no huge backlog of 70% cheaper lumber preparing to flood the market from Canada.

Obviously oil prices are politically controlled, 1/3 to 2/3 of the costs of a gallon of diesel is tax. If OPEC and the refineries said diesel was free, I'd still pay nearly a $1/gallon in taxes here. That varies per location, you happen to live in a cheap state. Take a second to thank goodness you don't have the California fuel tax burden. I'll let you draw your own conclusions on the different political systems of those two states.

[Jeff Ramsey]

The Canadian softwoods tariffs is I believe 30%. So if Pres Biden eliminates this ridiculous tariff that might help to bring down prices and increase supply of Canadian softwoods coming into the US. On fuel prices, this is two fold. A number of Texas Gulf coast refineries went down in the storm due to freezing and electrical blackouts. This seriously disrupted supply of diesel and premium fuels. Also Russia and OPEC are manipulating global supply to try to get prices up. I suspect that we'll see oil stabilize at about $65/bbl. And BTW, there is really nothing any president or congress can do to change oil pricing as oil pricing is completely dependent on international conditions.

The softwoods tariff is 9% (it was just over 20% but was reduced in December), and is justified because almost all timber in Canada is owned by Provincial Govts who set the harvesting price. It’s not competitively set and therefore is considered a Govt subsidy (this dispute has been going on for decades). The softwoods tariff appears to have little to do with the current lumber pricing, which is supply chain and demand based.

Here’s an interesting read.

https://www.dwmmag.com/disputes-over...iff-reduction/

[Alex Zeller]

I don't know how this impacts the price of wood but in the past it was very common to see rail cars loaded with lumber coming down from Canada or empty ones returning. I haven't seen much of that lately. In fact I haven't seen may trains at all. Could be they shifted the time they pass by this area or are running a lot fewer trains.

[Peter Kelly]

The price of cedar has been climbing over the last few years and is at a ridiculous high now. I don't really see it ever going back down to where it was in 2015.

[Jeff Ramsey]

I drove from southeastern PA to New Hampton, NY in September for that very reason; red cedar prices. I found a lumber yard in New Hampton that bought a large flat of miscellaneous red cedar and he had the posts I needed, along with some other 2x's. His price was less than half what I could get locally. The pergola is finished, but I wouldn't build it now because of red cedar prices.

[Mike Soaper]

The owner of a local garden shop and I were talking about the high lumber prices, and he said one of his regular customers is a builder/contractor that because of the crazy lumber prices now gives quotes that are only good for 7 days

[Peter Kelly]

I drove from southeastern PA to New Hampton, NY in September for that very reason; red cedar prices. I found a lumber yard in New Hampton that bought a large flat of miscellaneous red cedar and he had the posts I needed, along with some other 2x's. His price was less than half what I could get locally. The pergola is finished, but I wouldn't build it now because of red cedar prices.

This guy? https://newhamptonlumberco.com/

Didn’t realize he had dimensional cedar, will have to check him out.

[Jeff Ramsey]

Yep, that's the place.

[Thomas Colson]

As of today, lumber is 197% higher than a year ago and is forecast to dip A LITTLE by the end of this year, with Globex showing a sharper dip in May-Jan quotes. I suspect hedge fund managers put a bit more calculation in their models than a lumber yard purchasing agent, but either way, I wouldn't expect pre-rona lumber prices, ever. Another issue we have is these prices have been doing nothing but go up, and places like the BORG still can't keep wood on the shelves! So even if the sawmill comes down, BORG has already learned what the market is willing to pay so they have no incentive to lower prices despite what the sawyer is selling it for. My 2 cents, starting in about 12, and lasting for another 12 months, we're going to see a massive amount of SFH's hitting the market as landlords get out of the business due to the massive amount of people not paying rent right now (either legit or not legit reason), or, same situation and the banks foreclose. I think that will put the brakes on this new construction boom and only then will we see somewhat normal, albeit adjusted for inflation, prices. Good friend of mine is a mortgage banker for a local bank, and about 10% of his portfolio is investment property owners in that situation (not getting rent). He's thinking that in 2022 they're not going to be underwriting a lot of new construction. The only good thing I've seen is my local hardwood supplier doesn't seem to have gotten any higher over the past year. Didn't help me when I needed a lot of plywood though. And yes, there are some other factors contributing, fuel prices are rising rapidly, timber sales in national forests dropping just as fast. For contractors, I wouldn't even give a 7 day limit on a quote, I'd just quote "Materials cost at the time of purchase" or let the home owner buy their own materials.