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Lumber crash leads to 'blowout' sales as prices crater
- hindsightbias 5y agoKrugman was right again.
- motohagiography 5y agoRight about what though? He's like the Piers Morgan of economics, so he could use the win.
- riffraff 5y agoNot op, but presumably: that spikes in prices where temporary bounce backs rather than structural switches to high inflationary years. Which is also the view of the Fed and the ECB, so not a particularly weird position from Krugman.
- dystopiabreaker 5y agoah yes, guy who predicts the euro will fail every 2 years, and who predicted that the internet would be a fad, right again
- bildung 5y agoI've been reading Krugman regularly for the last decade and can't remember him saying anything like this. Feel free to provide a source.
- bastard_op 5y agoOh, so now you want to make a deal instead of just rape and pillage the proverbial market...
- smabie 5y agoWhat? People sell shit for what people will pay for the shit.
- reilly3000 5y agoIf the price keeps dropping at this rate lumber will be free by December! /s Seriously, this is a welcome correction, and another sign that runaway inflation fears were based on hyperbole.
- llbeansandrice 5y agoWait, people were saying/thought that this was runaway inflation and not a result of supply chain issues because of COVID and tons of people suddenly having to spend way more time in their house because of COVID? Maybe I'm ignorant of the inflation argument more than anything else but it doesn't even pass the sniff test in my opinion.
- 542458 5y agoThere seems to be a group of people who predict hyperinflation at the drop of a hat. I’m not sure if it’s paranoia or motivated reasoning though. Maybe a mix of both?
- deleted 5y ago[deleted]
- HWR_14 5y agoIt may have started as one or the other, but at this point they've been predicting hyperinflation for so long that they now have motivated reason to be "right, just called it too soon"
- vibrato2 5y agoOr doubling the money supply in a year. Not exactly an unrelated event like a hat drop
- imtringued 5y agoI think people predicted hyperinflation since QE has been introduced. What people don't get is that QE increases base money. When banks run out of reserves the central bank gives them more. The reverse relationship doesn't have to hold. Giving banks more reserves does not force them to lend the money out. The relationship between bank lending and base money has been fully decoupled. Whenever QE increases the supply of bank reserves it introduces more noise into the statistics. Just because QE doesn't create inflation doesn't mean it is a free lunch though. QE purchases treasury bonds and effectively takes them out of the market. The government is paying interest to itself. There are institutions that need those treasury bonds which results in a collateral shortage. These institutions will continue buying treasury bonds driving interest rates slightly negative leading to a "technical" form of deflation however it is quite insignificant.
- silisili 5y ago2x4s are reasonable again near me. However, plywood is not for some reason. The cheapest grade crap is 30 a 4x8 at Lowes tonight.
- Mountain_Skies 5y agoThe price drops do seem to have been selective. I've been waiting to buy a bunch of landscape timber for some projects in the yard but the price hasn't gone down one penny from the peak. Many other types of lumber have gone down. No idea why this is the case. I can see on the big box stores websites that the inventory keeps going down and getting replenished, so unless they bought a bunch at the peak and warehoused them, it doesn't make sense to me why they're more than twice the price they were six or seven months ago while other products have returned to similar prices to what they were early in the year.
- 10GBps 5y agoI don't think prices are "cratering" so much as just returning to normal rather than price gouging. Now if I could just buy a GPU for a normal price...
- dageshi 5y agoI don't think it'll ever happen until massive new fab capacity comes online at this point.
- throwawayffffas 5y agoI wonder whether etherium finally moving to proof of stake will actually have an impact on gpu prices.
- Bombthecat 5y agoNo, those people will move to a new coin
- gzu 5y agoNo, you don't simply "move to a new coin". ETH is currently a 420B market cap and rewards GPU miners something on the order of 13,000 ETH a day conservatively (without fees). That's nearly 50m dollars a day or 1.5B dollars a month! The only "other coins" available to be mined with GPUs are tiny. Ethereum classic has only a 8B market cap, Ravencoin with 1B, then many sub 1B coins. https://www.kryptex.org/en/mining-calculator https://www.kryptex.org/en/mining-calculator
- MrBoomixer 5y agoWhat information do you have to backup that opinion?
- bobsmooth 5y agoThe owners of mining farms aren't going to just toss out their gpus.
- bandyaboot 5y agoI’ve been following these prices closely for most of the year and what’s striking to me is just how wrong nearly all the industry experts were throughout the year. I don’t recall reading a single opinion that was anything other than “prices will remain very high for the foreseeable future.”
- kasey_junk 5y agoStrong disagree. Basically every opinion I read was “Jesus defer work until prices stabilize”
- 542458 5y agoI’m not sure if you’re referring to economic or lumber experts, but the more reputable economists that I saw were mostly saying that the price shocks should be transitionary. For example, https://mobile.twitter.com/paulkrugman/status/1389555957076799490 https://mobile.twitter.com/paulkrugman/status/13895559570767...
- godelski 5y agoThis is what I saw too. News networks that want to sell doom and gloom (most specifically a certain network we all know we're talking about) have "economists" sell doom and gloom in ways that don't really make sense. Like never in the history of ever has something skyrocketed and then just stayed there while the American currency inflates to account for that commodity (or even groups of commodities). But that was a serious position that I've heard those "economists" say. While the mainstream economists were like "just wait it out and buy some shorts. This bubble will pop but hard to say when." Logically we should expect the latter happen because it follows historical trends too. But maybe I'm wrong. I'm not an economist. Just someone who listens to them.
- ghshephard 5y ago100% of the analysts that I read, and, if I'm not mistaken, close to 100% of the mill owners recognized that this was a temporary blip, and that lumber would fall back into the $500sh range (There is a natural floor - that's the price at which BC mills no longer make money and start shutting down/curtailing capacity.) None of the mills started expanding or engaging in capital programs to try and take advantage of the increased prices.
- paulpauper 5y agoThis is why commodities make poor investments. As prices go up, so does supply and demand for alternatives.
- mgkimsal 5y ago"If high prices held you back from building, you are in luck, as the tables have now turned" Except... many builders will find some other reason/excuse where prices are high to keep prices high. We were looking at building a house - talked to builder last November and... looking at $470-$480k range (ballpark estimate). Lumber was going higher, but we'd reduced the house plan size. Lumber kept going up... and up... Then... no parts were available (IIRC certain trusses were unavailable for months, that's just one that stuck out). We regrouped a bit later. House was now going to be min $620k, but... no guarantee it would be $650k or $700k. Builder has been working on spec homes in the $700k-$900k range last few months, whereas exact same size houses 1 block away they were building and selling in the mid-$400s 14 months ago. Before we cancelled the project, we asked why we couldn't build something smaller and target a time in a few months, as lumber was coming way down to where it was 18 months ago. "Everything else has skyrocketed..." which... I know things have gone up some in the last 18 months, but I think there's simply some "get high prices while you can". When talking to some home finance folks, they're all saying "watch out for HELOCs in 18-24 months - people will be clamoring for HELOCs as they won't be able to sell these $700k houses they're buying, because they won't have appreciated at all, and the homeowners will be trapped". There may be 'blowout' prices on lumber itself, but around here I'm not seeing any 'blowout' prices on new construction in the short term.
- chromatin 5y agoWe backed out of working with a builder because price went up about $100k over the course of 3 months earlier in 2021. There is no way that was justified , lumber and supply chains notwithstanding. I respect his right to maximize profits in this market, but I won’t be part of it.
- dannyw 5y agoUnfortunately I suspect it'll never be cheaper to build.
- matt_s 5y agoSecond this. If inflation numbers keep going up 5% per month, the cost of literally everything will keep going up. There are labor shortages in a lot of industries which means employers need to compete on $/hr or workers will go to where they can make more. Not out of spite or greed, it will cost more to feed their family because those costs will have gone up. This also means the housing prices will probably continue to go up as well.
- omgwtfbyobbq 5y agoPrices have already stabilized at the local big box hardware store. 2x4x8s were below $2 a month ago and are back to $3.50+
- xnx 5y agoMulti-year chart of lumber prices puts some of these "skyrocketing" and "cratering" headlines in perspective: https://tradingeconomics.com/commodity/lumber https://tradingeconomics.com/commodity/lumber
- NikolaNovak 5y agoI like the chart, but it's exactly what the article indicated, no? Article indicated It went up to 3 times the price and is now down to pre rocket prices. Charts seem to agree?
- da_chicken 5y agoBecause sometimes "skyrocketing" means going 1% over the average annual high, or "cratering" going 2% below widely published analyst forecasting. In other words, the media is often radically hyperbolic to get clicks and ad views. So much so that when they use the same adjectives correctly they don't carry any weight anymore. They're the boy who cried wolf.
- arthurcolle 5y agoAverage annual high (I'm assuming you're using the stock price daily high from a multi-year set of highs from its daily OHLC bars as the 'high' here) is a poor metric to evaluate whether or not a company is doing well. Low beta stocks usually don't really outperform so I mean you need to just optimize for low correlation, high relative outperformance vs. a sector wide index or something. I just don't think the random numbers you asserted are real at all - this would be something that one would need to test. Anyone getting their 'market moving news' from BusinessInsider/financial news sites is doing it wrong.
- da_chicken 5y agoThe entire point was that the metrics I chose were bad. Furthermore they were such minor differences that even if they weren't bad they still wouldn't be relevant. They were intended to be comically useless. It means that the hypothetical author of the article didn't have any idea what they're reporting, which is exactly what I was trying to express. The authors rely on the readers' ignorance and the way many people reflexively accept numeric data as true, pertinent, and sufficient evidence of any claim.
- baybal2 5y agoI think it was good for America. Americans finally started to seriously transition to steel thanks to that.
- betwixthewires 5y agoThis is wonderful. I can't wait for house prices to follow.
- maybenotafart 5y agoidk its still almost 1.5x as expensive for a 2 by 4 at home depot
- Kluny 5y agoThe only price I watch is 2x6x10 cedar. They were up to $51 back in April, now they're back down to $33. Still seems high but good enough for me to get back to my projects.
- kevin_thibedeau 5y agoLet's hope copper follows suit. I need to buy some heavy gauge wire.
- ggm 5y agoUntil the intermodal container crisis resolves, Prices worldwide for construction materials will probably still be all over the place. I'd expect localized shortages of almost anything, if it has to be carried by sea.
- dr_dshiv 5y agoThis is great news for next year's burn
- runawaybottle 5y agoThe hope is the same happens to semiconductor prices and supply. We can never have this happen again.
- 99_00 5y agoLumber prices peaked the day after a story about Lumber prices made the front page of hacker news. https://news.ycombinator.com/item?id=27788549 https://news.ycombinator.com/item?id=27788549
- nebula8804 5y agoYour link leads to a blank page
- quickthrower2 5y agoYou need to be logged in with the show dead profile option to see it.
- 99_00 5y agoThis is what was in the post. The imgur link seems to be dead now too. Lumber mania is sweeping North America (May 6, 2021. 119 points) https://news.ycombinator.com/item?id=27036557 https://news.ycombinator.com/item?id=27036557 Lumber price peaks May 7, 2021. https://imgur.com/ynWJtwQ https://imgur.com/ynWJtwQ source: https://www.nasdaq.com/market-activity/commodities/lbs https://www.nasdaq.com/market-activity/commodities/lbs The lumber bubble burst. Here’s what comes next (June 22, 2021) https://fortune.com/2021/06/22/lumber-prices-bubble-burst-price-of-wood-costs-building-development/ https://fortune.com/2021/06/22/lumber-prices-bubble-burst-pr...
- chovybizzass 5y agohopefully this happens with everything.
- Fiahil 5y agoWhat bothered me the most during this whole episode, is that the prices also skyrocketed, here, in Europe. We had nowhere near the same need for wood as north-american constructions.
- teekert 5y agoBecause the markets are connected? If you have lumber, why sell it on the cheap to Europeans when you can get more from the Americans?
- skybrian 5y agoTransportation costs seem high: > It’s difficult to ship lumber overseas cost effectively: lumber is (or was) one of the least expensive materials on the planet. At $300 per 1000 board feet (the average price over the last 25 years), a 20 foot shipping container holds just $4500 worth of material. The cost of transporting a container across the ocean is $1700 dollars or more. https://constructionphysics.substack.com/p/lumber-price-faq https://constructionphysics.substack.com/p/lumber-price-faq
- Ekaros 5y agoAnd my understanding is that real shipping rates are currently much higher than the 1700... As are all shipping rates...
- Fiahil 5y agoShipping is so expensive, if you start shipping wood instead of sourcing it locally, then no wonder the price is going to go up even faster. What should have been a good alternative here, is to prevent/taxe massively exports of wood from EU to NA. Prices would have stagnated near a peak in NA and we would have kept our wood supply at a moderated price, here.
- thedougd 5y agoOn the contrary, wood is shipped from the US to Europe for energy. This is Long Leaf Pine, one of the species commonly used for framing homes in the US. https://www.newsobserver.com/news/business/article238395173.html https://www.newsobserver.com/news/business/article238395173.... https://www.politico.com/news/magazine/2021/03/26/biomass-carbon-climate-politics-477620 https://www.politico.com/news/magazine/2021/03/26/biomass-ca...
- cowshit 5y agooh you already banned me over notthing FUCK HACKER NEWS FUCK HACKER NEWS FUCK YOU FUCK YOU
- sillysaurusx 5y agoIs this a Submarine, I wonder? http://www.paulgraham.com/submarine.html http://www.paulgraham.com/submarine.html (Diff with https://usatoday30.usatoday.com/money/industries/retail/2004-09-01-suits_x.htm https://usatoday30.usatoday.com/money/industries/retail/2004... to see some interesting similarities. "Suits are back, and so is lumber.")
- jdblair 5y agoI have a renovation in progress in Amsterdam, and the cost increase is coming from the 40% increase in the price of structural steel (rebar and shell for pilings). Maybe I'll get a break on lumber prices, but I doubt it.
- legulere 5y agoIf you wait for a bit longer you will see prices rise again and then fall again until the market finds back its equilibrium. This is known as the bullwhip effect: https://en.m.wikipedia.org/wiki/Bullwhip_effect https://en.m.wikipedia.org/wiki/Bullwhip_effect
- mrleinad 5y agoThat looks a lot like a stock market pattern (and it makes sense it does) Do you know about any books that might expand on the subject, maybe mentioning other effects?
- grumple 5y agoNot a book, but this was mentioned in some comments section on HN recently: https://www.shmula.com/the-bullwhip-effect/310/ https://www.shmula.com/the-bullwhip-effect/310/
- cryptoquick 5y ago> "Builders still have to clear their inventories of having purchased higher-priced lumber. It takes a while to clear the system," Lee said. "Yes, lumber prices from the mills came down dramatically over the summer, but that's unfortunately taken a while to reach the rest of the industry and consumers." > Lee said when it comes to new home construction, pricing is being complicated by ongoing pandemic-related supply chain challenges. While difficulties related to lumber have eased, home builders are still dealing with delivery delays and price inflation on everything from plumbing and electrical products to kitchen cabinetry. > "It doesn't compare to the three to five times price increases we saw with lumber, but I'd say on average, we're seeing 10 per cent increases on everything, including the kitchen sink," Lee said. "And we are still seeing delays on closings, just because of an inability to get products and materials." Meanwhile... August 27th, 2021: > "...households, businesses and market participants also believe that current high inflation readings are likely to prove transitory," Powell said. https://www.reuters.com/business/why-fed-chair-powell-still-thinks-high-inflation-is-temporary-2021-08-27/ https://www.reuters.com/business/why-fed-chair-powell-still-... Sigh. Nobody believes that, Jerome. Nobody really believes that.
- blitzar 5y agoI believe it. I am actually more worried about a deflationary spiral and an actual depression when the covid punch bowl gets taken away than moon growth for ever. Things were shitty before covid happened, and many were expecting a recesion in 2020 before covid existed, markets siezed up late q3 19, and needed help then. The world has since been living on vast quantities of high grade heroin dished out all over the world, quite rightly by various central banks. Only once the covid tide goes out we will see who has been swimming naked.
- lotsofpulp 5y agoWhy would they US government not be able to print its way out? I assume the US will be able to as long as it has the preeminent military and a stable society and court system, with relatively high levels of trust compared to other countries. If another similar size country becomes a more stable option, then I would be worried.
- DeWilde 5y agoAre houses in the US solely built using lumber/wood or do they have brick walls and concrete floors like here in Europe?
- karamanolev 5y agoAs a European having lived in the US, brick walls and concrete floors are definitely a way rarer find than in Europe. Even some single-floor multi-apartment complexes are entirely wooden. The typical motel from American movies, but instead residential, is also almost entirely wooden.
- reissbaker 5y agoVery much depends. The foundation is always concrete, although for single-family or duplex homes the floor being concrete would pretty non-standard (that's usually wood, tile, or faux-wood e.g. vinyl, laminate). The framing is generally lumber. The exterior siding can come in any number of forms: stucco, wood, metal, vinyl, brick, etc. Brick in particular is rare on the west coast, FWIW, due to seismic conditions, but is much more common in the east.
- dudul 5y agoIt depends on the area. And it applies to Europe too. Plenty of areas where wood frames are more common.
- orthoxerox 5y agoWhere does insulation go in a brick single-family home?
- question002 5y agoDuh, stories about the "lumber shortage" were obviously industry plants trying to raise prices. It's just so crazy that people are played on this site so easily.
- OliverJones 5y agoRead the first chapter of _The Fifth Discipline_ by Peter Senge. It describes this lumber situation fairly clearly, for a different product (trendy microbrew beer).
- deleted 5y ago[deleted]
- Pxtl 5y agoSo will any of the inflation doomsayers notice? Econimists were specific: inflation halted in 2020 but will have a small jump in 2021, but most of the extreme price shocks are supply chain issues and not inflation. That has born out with lumber.
- exabrial 5y agoI'm really happy Democrats/Republicans didn't try to "fix" the lumber crisis along with everything else they've completely f#@*ed. Let the free market ride! This is incredible news for low income families that have been waiting to build residences but were constantly priced out of market.
- jedimastert 5y ago> low income families that have been waiting to build residences I don't think building has been an option for low income families for a while, or maybe I just know of very few markets where land was the limiting factor instead of materials & labor.
- exabrial 5y agoLand is pretty cheap in the vast majority of places. Land in coastal cities is not.
- danans 5y agoEven in the places where land is "cheap", it's only cheap for middle to higher income people in that area, or people doing income / wealth arbitrage from expensive areas. It's not cheap at all for lower income people from the cheap area.
- steve76 5y agoGovernment hands out free checks. Criminals use them to buy weapons to kill people. Their victims flee to the hills and build. Government stops handing out free checks. Criminals die. All that material sits there and rots. We'll pay you if you will take it.
- baremetal 5y agoi quit my software job and bought 20 acres of undeveloped farmland. then i got a job on a framing crew so i could learn to build my own house. built a polebarn on the land so far. and getting ready to dig a foundation probably next year. its been the most exciting fulfilling adventure of my life so far. just got first harvest last month.
- shados 5y agoMy friends and I always joke about quitting our software jobs to go work on a farm when things get rough. We're obviously just joking (things are never that bad). But you actually did it and living the meme. Kudos!
- nexuist 5y agoWait, you guys are joking? Over in my corner everyone is completely serious about it. My girlfriend wants to buy our first cow in the next two years. I work fully remote so all I need to do is find some land.
- shados 5y agoI mean, I know one software engineer who has a farm and probably could do it if the time was right. The rest of us would likely poison ourselves, break something, or starve if we tried. Living things are pretty far from my area of expertise, and youtube videos only get you so far.
- mywittyname 5y agoI once explained the premise of Stardew Valley* to my partner and they just looked at me and said, "that's a little on the nose isn't it?" * You play as a character who quits their software engineering job to fix up a run down farm you inherited from your grandpa.
- baremetal 5y agothings may or may not get worse. but if they do get worse it will be too late to switch. lots of skills are needed to succeed, skills that you just dont get exposure to if you arent living the lifestyle. for example ive learned some blacksmithing and carpentry skills, and ive built and fixed cars throughout my life. always had a garden when i lived in the city etc. ive wanted to do this for the last 5 years or so.
- josefresco 5y agoI'm doing some work on my house, I STILL get asked from concerned friends/family members about lumber prices. It's funny how one news snippet from months ago can stick in people's minds, even though it's a dynamic and constantly changing market.
- pfdietz 5y agoLumber is well above where it was for all of 2019, pre-pandemic. https://www.nasdaq.com/market-activity/commodities/lbs https://www.nasdaq.com/market-activity/commodities/lbs