30 ms·

Lumber rally cools with transport snarls easing, buyers balking

186 points by clove 5y ago

tormock 5y ago
homes are still popping up at every corner here in GA... the housing prices didn't drop as fast as I was anticipating... sold my home in 2021
- p1necone 5y ago
  People like to talk about housing prices as if it's just a simple supply issue which can be fixed by building more houses, but it doesn't seem that simple to me. Sure, there might be a lack of supply... for speculative investment. But in terms of there just being enough houses for the population to /live/ in, aren't we already there? There's no cap on "need" for housing investment, if it continues to be profitable, people will keep investing in more property - you'll never reach a point where you've built "enough" for prices to get under control.
  - HFguy 5y ago
    No, there are simply not enough houses relative to demand. Just having enough space to house everyone not enough.
    - nemo44x 5y ago
      That’s not true. There aren’t houses in places people wish they could live on their salary/savings. Plenty of affordable houses in many places if people were willing to live there.
  - orange_joe 5y ago
    A big part of the problem is distribution, a home in Akron isn’t as valuable to society as a home in SF/NYC. People are locked out of opportunity (which doesn’t just enrich the individual but broader society though taxes and more efficient labor) through lack of housing.
    - jcadam 5y ago
      > a home in Akon isn’t as valuable to society as a home in SF/NYC. What an odd thing to say.
      - seanmcdirmid 5y ago
        If Akron had a hot economy with high paying jobs, its housing would surely be more valuable.
      - rcpt 5y ago
        It makes perfect sense if you're concerned about the economy https://www.google.com/amp/s/www.nytimes.com/2017/09/06/opinion/housing-regulations-us-economy.amp.html https://www.google.com/amp/s/www.nytimes.com/2017/09/06/opin...
    - selimthegrim 5y ago
      Akron is not devoid of contributions to industry (the university has cut some departments lately) -signed, child of two UA alums who went to Caltech. I know another UA alum from my HS (https://www.linkedin.com/in/stanwang/ https://www.linkedin.com/in/stanwang/) who has done quite well building venture backed companies.
      - orange_joe 5y ago
        I don’t doubt that many have achieved great things in Akron, but was rather arguing that the relative level of opportunity is lower in Akron (median income 23K) than SF (54k) or NYC (32K). The typical person is more economically productive in cities like NYC or SF.
    - vsskanth 5y ago
      I used to live in Akron. The tire, rubber and chemical industries are big and have a lot of high paying jobs. This is not even taking Cleveland into account which is a massive medical hub. Looking at just the city is misleading. You need to look at the desirable suburbs between Akron and Cleveland (ex. Hudson). They're massive, expensive homes there. I understand what you're saying but Akron probably isn't the most ideal example for your comparison.
  - refurb 5y ago
    If you keep building at some point it becomes unprofitable to invest in housing. And what is more likely is we see housing prices drop, a massive pullback and an oversupply.
    - iknowSFR 5y ago
      Except that most builders are investors in the SFR space. In the end, we’re expanding rental availability, not first-time home owners.
      - refurb 5y ago
        Why not first time homeowners? It all depends on returns.
        tormock 5y ago
        Because renting is unlimited income and selling is a one time income?
        refurb 5y ago
        Look up the "time value of money", NPV and return on investment.
  - rgarrett88 5y ago
    Nobdy wants to lose money leaving their real estate investment empty. Vacancy rates are low. If we had "enough" homes it wouldn't be profitable to speculate. Most peope agree we're in a housing crisis. We need to be focusing on making it legal to build more housing rather than worrying about if people are making money owning homes.
    - p1necone 5y ago
      I'm not saying we shouldn't be doing those things (making it easier to build new houses). I'm just saying it seems naive to think that that /only/ doing that will make houses affordable.
    - deleted 5y ago
      [deleted]
    - tmnvix 5y ago
      > Nobody wants to lose money leaving their real estate investment empty. Vacancy rates are low. People do leave properties empty - it's easier to do in a rising market when it will still make you money via capital gains (and leveraging equity to purchase further properties). It's worth keeping in mind that industry reported vacancy rates are typically the proportion of properties that are on an agent's books and are currently vacant. Many properties are not included (land-banked, holiday homes, AirBnB, those currently being renovated, up for sale, etc). I live in a house that is currently valued at NZD1.7M. This same house was purchased for NZD0.56M 12 years ago. That gain totally dwarfs the amount of rent the owners could have collected in that time. Consider NZ. According to Statistics New Zealand in 1991 there were 1,307,000 private dwellings and 1,252,600 households. A difference of 4.16%. In 2017 there were 1,855,500 private dwellings and 1,734,800 households. A difference of 6.5%. During this time household sizes decreased and house prices increased far in excess of inflation. In 1991 the average house was NZD173,000 (in 2016 dollars). In 2016 it was NZD495,000. Today it is over NZD1,000,000 (or about NZD900,000 in 2016 dollars). Consider Australia. Prosper Australia's Speculative Vacancies Report [0] (looking at water usage to determine under-utilised properties) suggests areas with high vacancy rates in Melbourne correlate with areas where capital gains (i.e. percentage price increases) are greatest. Desirable areas have higher vacancy rates, even approaching 20% by their reckoning. This is the opposite of what you would intuitively expect in a naive supply and demand equation. Consider the UK. A study in the UK [1] using council data found that high property prices correlate strongly with what the study refers to as 'low use properties' (LUPs). A speculative boom creates extra demand. As Ireland discovered during the GFC, when that investment demand dries up, the empty homes (and over-supply) are revealed. This will happen again and it will be when people can no longer take on more debt (most likely due to rising interest rates). [0] https://www.prosper.org.au/wp-content/uploads/2019/04/Speculative-Vacancies-9.pdf https://www.prosper.org.au/wp-content/uploads/2019/04/Specul... [1] https://theodi.org/event/friday-lunchtime-lecture-empty-homes-and-house-prices-is-there-a-relationship/ https://theodi.org/event/friday-lunchtime-lecture-empty-home...
gitfan86 5y ago
I expect this to be the beginning of a recession. A lot of consumers spending is based on the thought that their home is going up in value.
- after_care 5y ago
  What? We're just returning to December 2021 lumber prices. Lumber is just one input into home values. https://www.nasdaq.com/market-activity/commodities/lbs https://www.nasdaq.com/market-activity/commodities/lbs
- deleted 5y ago
  [deleted]
- lost_soul 5y ago
  Just anecdotally, we went out to eat at a place we hadn't been to since before the pandemic. Their prices have doubled. We spent $50 on lunch.
  - mnholt 5y ago
    Seeing the same things here, lunch is $25+ a person at casual sit down places. Some have even done away with lunch menus so you’re left with lunch portions for dinner prices.
    - break_the_bank 5y ago
      This has to be a major city right?
      - mnholt 5y ago
        Dayton, Ohio. Depends on your definition of major.
    - ipaddr 5y ago
      Feels like places trying to make up for any covid losses over the last few years.
ClosedPistachio 5y ago
Actual article title: "Lumber rally cools with transport snarls easing, buyers balking"
- tormock 5y ago
  - cercatrova 5y ago
    New accounts are often flagged, I just vouched for you.
    - tormock 5y ago
purple_ferret 5y ago
It's simply too expensive to do any sort of renovations at the moment. Lumber prices are just a part of it
x3sphere 5y ago
It hasn’t started cooling yet here in AZ, still seeing properties going for over list and prices are still climbing. That said I see interest rates are now approaching 5% so have to imagine it might pull back some soon, really depends on the supply though.
- nemo44x 5y ago
  Come to the northeast where choice properties are easily going 40% over list. Homes that sold for 800k in 2017 are going for 1.9M right now.
  - mynameishere 5y ago
    I read numbers like that and I think, "Sure glad I'm not the one who'll be holding the bag on that." But then...I might be. I'm not sure. Someone's going to be making good on the money that disappears when the greater fool mails his keys back to the bank. Will it be the standard idiots Fannie, Freddy, Deutsche Bank, and whoever pulls the short straw at the NY Fed annual picnic?
    - nostrademons 5y ago
      You probably are the one holding the bag. Prices are exploding because mortgage rates are being held below the rate of inflation. In this scenario, it makes sense to borrow as much money as you possibly can and buy hard assets with it, because your mortgage is essentially a transfer of wealth from the bank to you. Normally banks would be the bagholders in this scenario, but because of securitization, they just package off the mortgage and sell it on the MBS market. The biggest buyer of MBS's lately has been the Fed, which they do with money newly injected into the market. The effect of this money creation is the inflation we've seen over the last 2 years, so effectively this has been a transfer of wealth from savers and anyone whose income is denominated in cash, to buyers and to some extent sellers of homes.
    - nemo44x 5y ago
      I’m not sure either and neither are real estate agents. My contacts there are thought we’d see a flat at best market this year. But here we are - biggest jump yet. Spoke with a notary a few days ago that said they’ve never been busier. People locking in low rates. But to me it seems like it’s going to cool fast. Rates going up. Fine if you’re long term. I went to view a house a few weeks ago listed at 1.25 and that seemed high. I asked my real stir if 1.6 gets it done and she said I doubt it - need 1.75. Heard (not published yet) a rumor it went for 1.835. Anecdotal but something seems broke. Saying that I just took out a line of credit for a few hundred thousand.
sydthrowaway 5y ago
The housing market won't cool until the political class is barred from owning multiple homes and speculating. Why would they act not in their interest?
- daenz 5y ago
  Wouldn't taxing uninhabited homes be more realistic and effective than banning people from owning things? If the tax hurts enough, then the prices drop so that uninhabited homes get people living in them.
  - dec0dedab0de 5y ago
    I think this is the best solution. Should be for commercial property too. I've seen buildings be unoccupied for over 15 years, how can that be in anyone's best interest?
    - downrightmike 5y ago
      Owners are probably using that property to get a tax cut
      - pc86 5y ago
        If it's commercial property you're getting a tax cut whether it's rented out or not.
    - Gigachad 5y ago
      >how can that be in anyone's best interest? Often because lowering the rent lowers the value of the property which was based on its expected rental return. 15 years is quite extreme but it would often be preferable to go a few years without commercial tenants than to lower the rent and wipe out massive amounts of value.
      - alostpuppy 5y ago
        I’ve heard this before and it’s such a perverse set of incentives.
jcadam 5y ago
Maybe I can build that bookcase now....
- tvb12 5y ago
  Two of us! I was busy and never got around to purchasing lumber when the price of a 2x4 dropped to $3.50-ish. I didn't realize you had to time your purchases. Now I sit here, cut lists ready, wondering who is buying 2x4s for $8.30. But the price will come back down... right?
- hcrisp 5y ago
  Yeah, I'm finishing a basement and the select 2x4 studs were over $9 last week. So I went with economy studs for $4.35 but you have to really pick through them to get good ones. I went back to get more and now they are sold out - other people probably figured out they can do similar. If this news holds maybe we can see a drop soon at the box stores.
deleted 5y ago
[deleted]
sb057 5y ago
>Futures tumbled to US$974.80 per 1,000 board feet on the Chicago Mercantile Exchange on Friday, heading for a sixth straight decline. For comparison, it was $403.60 at the start of 2020: https://tradingeconomics.com/commodity/lumber https://tradingeconomics.com/commodity/lumber
- thematrixturtle 5y ago
  This. Lumber prices are down 30% since March 1st, but still 250% up since COVID.
  - EVa5I7bHFq9mnYK 5y ago
    Isn't it 150%? Percentages are hard.
    - thematrixturtle 5y ago
      If pre-covid index is 100, the current price is 250, which can be expressed as either 250% of the previous price or a 150% increase in price (up by 150%). English is hard.
- sandworm101 5y ago
  Ya, the price bubble hasnt really burst. It just deflated a little but remains a bubble.
  - after_care 5y ago
    Why do you say lumber is a bubble? It seems to me all of the lumber being produced is being used, and lumber is a limited and valuable natural resource. I don't see how lumber supply suddenly increases or lumber demand suddenly decreases.
    - stjohnswarts 5y ago
      the price is a bubble not the volume. As supply goes up then the price will drop as demand is staying the same or dropping a bit depending on who you ask.
apetresc 5y ago
From the article: > “I think the price decline is tied to the DIY (do-it-yourself) sector slowing down due to high lumber prices, with people spending their money on other things like travel,” said Russ Taylor, president of Russ Taylor Global in Vancouver. So their expert analysis is that lumber prices are falling because lumber prices are high?
- ravi-delia 5y ago
  Eh, I could see it. A lot of the lumber price increases were due to logistical issues up and down the supply chain, those same issues would cause this kind of lag. If supply adapted fast enough it wouldn't be an issue, but if supply adapted fast enough prices wouldn't have gotten that high regardless. Besides, things are weird right now, consumers aren't as able to act rationally because they aren't used to it.
  - mblock 5y ago
    It actually stops mills from working if high prices stop people buying, which turns the price down until mills can restart operations.
- lupire 5y ago
  Sure. Prices hit an unsustainable level, soaked up the small bit of demand at the peak, and then declined to find more demand. Econ 101
  - ravi-delia 5y ago
    In all fairness to OP, Econ 101 would hold that for the price to change you'd need a supply or demand shift. So if prices got as high as they did, the prices alone wouldn't bring it back down. By 102, of course, slight (or in the current lumber market, enormous) lag in the supply chain and largely habit-driven consumers make for more bumpiness on the way to equilibrium.
- JimtheCoder 5y ago
  The best cure for high prices are high prices
rcpt 5y ago
What reasonable place do people live where the price of lumber has anything to do with housing? California property market is a full on casino. When you buy here all you're getting is a leveraged bet that you'll be able to sell it for more to a greater fool. It has nothing to do with fundamentals especially not the cost of materials.
- seanmcdirmid 5y ago
  Considering how much wood they go through and how housing structure always depreciate rather than appreciate (even if the land appreciates, the market for a second hand house is small), Japan.
  - galangalalgol 5y ago
    Why are new buildings preferred? In the US people like older houses, even when they are poorly built.
    - seanmcdirmid 5y ago
      https://robbreport.com/shelter/home-design/japanese-homes-are-ephemeral-facing-demolition-just-22-years-in-heres-why-1234608438/ https://robbreport.com/shelter/home-design/japanese-homes-ar...
    - fomine3 5y ago
      We like newer buildings as same as newer cars. It's comfortable overall. Why you like older buildings ?
      - galangalalgol 5y ago
        Many here like to keep old cars too, you regularly see cars from the 1950s still driving. Older houses like older cars have been tested by survivor bias. Older things stand out a bit too, so it is a way to be individualistic. A way to connect to the past too. Even if it wasn't your ancestors that built a house, learning about the people that did, and living where they lived and died is an interesting experience. In many cases the workmanship is something that could not be repeated given modern labor rates. So lots of little reasons. Also our modern homes don't vary as much as yours, they all look roughly similar. So an old house might be selected just to avoid the current popular design.
ryanSrich 5y ago
I’m not buying this, at least not for desirable areas. In the last 48 hours I’ve seen 6 houses close. Every single one in under 30 days (signifying significant, if not entirely cash offers), and each roughly 110-185% of asking price. Yes. One house I tracked on Redfin listed at $722k and sold for $1.31m. Most houses in the average zones are going for well over asking price. It’s not even a matter of competitive offers. It’s almost as if the asking price doesn’t even matter. The market is essentially converging on what can only be described as silent auctions. You come in with the highest amount you can pay or whatever you’ve been prequalified for and hope it’s high enough. But when 20-50 people are bidding on a single house it’s unlikely you’ll ever be near the top. It’s really hard to explain to people that aren’t following the market just how bad it is.
- deelowe 5y ago
  There are a lot investors out there right now. I get cold calls daily. As interest rates climb and supply shortages improve, I expect things to cool off. Probably not until after summer as sales always increase up until schools starts back,
- gnicholas 5y ago
  Could this be people shifting investments from other asset classes toward real estate, to be more inflation-proof?
- NegativeLatency 5y ago
  A close friend just bought a house in a largeish west coast city and it was as you described and worse than my experience buying a house about 1.5 years ago
- dominotw 5y ago
  > . One house I tracked on Redfin listed at $722k and sold for $1.31m. do you have a link by any chance?
  - ryanSrich 5y ago
    Sure. I have a few. $220k over ask- https://www.redfin.com/CO/Centennial/7405-S-Quince-Ct-80112/home/34887965?600390594=copy_variant&231528114=control&utm_source=ios_share&utm_medium=share&utm_nooverride=1&utm_content=link&utm_campaign=share_sheet https://www.redfin.com/CO/Centennial/7405-S-Quince-Ct-80112/... $230k over ask - https://www.redfin.com/CO/Centennial/7963-S-Clayton-Cir-80122/home/35006066?600390594=copy_variant&231528114=control&utm_source=ios_share&utm_medium=share&utm_nooverride=1&utm_content=link&utm_campaign=share_sheet https://www.redfin.com/CO/Centennial/7963-S-Clayton-Cir-8012... $297k over ask - https://www.redfin.com/CO/Boulder/5640-Table-Top-Ct-80301/home/35306632?600390594=copy_variant&231528114=control&utm_source=ios_share&utm_medium=share&utm_nooverride=1&utm_content=link&utm_campaign=share_sheet https://www.redfin.com/CO/Boulder/5640-Table-Top-Ct-80301/ho... $269k over ask - https://www.redfin.com/WA/Seattle/3829-Ashworth-Ave-N-98103/unit-B/home/8190276?600390594=copy_variant&231528114=control&utm_source=ios_share&utm_medium=share&utm_nooverride=1&utm_content=link&utm_campaign=share_sheet https://www.redfin.com/WA/Seattle/3829-Ashworth-Ave-N-98103/... $311k over ask - https://www.redfin.com/WA/Bellevue/12810-SE-29th-St-98005/home/508320?600390594=copy_variant&231528114=control&utm_source=ios_share&utm_medium=share&utm_nooverride=1&utm_content=link&utm_campaign=share_sheet https://www.redfin.com/WA/Bellevue/12810-SE-29th-St-98005/ho... $425k over ask - https://www.redfin.com/WA/Bellevue/90-145th-Pl-SE-98007/home/427153?600390594=copy_variant&231528114=control&utm_source=ios_share&utm_medium=share&utm_nooverride=1&utm_content=link&utm_campaign=share_sheet https://www.redfin.com/WA/Bellevue/90-145th-Pl-SE-98007/home... Looks like they changed the record history, but this was the one I was talking about - https://www.redfin.com/WA/Bellevue/2004-144th-Ave-SE-98007/home/509294?600390594=copy_variant&231528114=control&utm_source=ios_share&utm_medium=share&utm_nooverride=1&utm_content=link&utm_campaign=share_sheet https://www.redfin.com/WA/Bellevue/2004-144th-Ave-SE-98007/h...
ramesh31 5y ago
I'm building instead of buying. Unless you are dead set on a particular neighborhood it makes no financial sense to buy anymore. You can build a brand new 300k house on a 100k lot and have a 500k home with positive equity the moment you close.
- devy 5y ago
  Unless it's prefab house(aka modular home), it's gonna take you at least 6 month from the signing the contract of getting a lot to the house fully built. Labor market have been really heating up too - most of the builders are focusing building $1MM+ homes in premium districts definitely not worth their time to build a $300k home when they can build a million dollar home. If you are building the home yourself, good luck it's gonna take longer even if you are not working full time and can build house full time.
  - ramesh31 5y ago
    >Unless it's prefab house(aka modular home), it's gonna take you at least 6 month from the signing the contract of getting a lot to the house fully built. Fully aware it's going to be a 1yr+ long process. But after going through the housing market gauntlet and flat out refusing to do the insane stuff it takes to even get an offer accepted now (waived everything, 10%+ earnest money, etc., etc.) I couldn't care less about the wait.
- turtlebits 5y ago
  No offense, but if there's a 100k lot, it's because noone wants to live there.
  - deleted 5y ago
    [deleted]
  - atwebb 5y ago
    No offense, a statement like that (and the OP) without factoring in location means nothing. There are definitely 100k lots in places people want to live, some of them are pretty big. While everyone may not want to live there, there will be plenty of buyers.
jollybean 5y ago
Lumber is not an indicator of much, because distribution is a bit artificial. A lot of places have been sitting on lumber to keep prices high - a kind of distributed/collective collusion. I don't know for sure, but I believe the same thing happens to gas prices, whenever there is a reason for gas stations to jack up prices, they do, and justify it by 'oh there's a war in XYZ country'. Or if the headlines say 'Oil Shock' - then the bump up prices even though the pricing has not hit them at all. They can just get away with it, and they know it. So they all just do it and hold out until some of them 'blink' and prices come down. As far as the 'new home' anecdotes, I'm not sure if NYC/SF are ever very good barometers overall. Some places are designed to have demand. Just pop out into the exaburbs and see what's happening there. Or Orlando. Or Atlanta. etc..
Tiktaalik 5y ago
Rising interest rates will cool the market but that doesn't mean that the demand has vanished. People will simply remain longer in misery in their existing housing that doesn't suit their needs.
- AYBABTME 5y ago
  Some relative "misery"; if they can afford to own a house, they're probably not that miserable.
  - dragonwriter 5y ago
    Being able to get a loan to buy a home in the past doesn't imply being able to afford to own it now, especially if the loan was an ARM, had an interest-only or negative amortization period, etc. (but even with a conventional fixed mortgage, financial situation can change for the worse after buying.)
    - AYBABTME 5y ago
      This or not, having a house is pretty far away from "misery" in my book. At least you've got a roof over your head and no landlord to price you out of your home into the streets.
bricemo 5y ago
Time to build.
vsskanth 5y ago
Not yet. Single Family Homes still going under contract the first weekend they list in desirable Charlotte NC suburbs. This is in addition to atleast 3 new construction developments within a couple miles of each other where I live, all priced 20% higher than existing homes. Looks like there's still demand out there.
- saltminer 5y ago
  Hey, neighbor! The desirable areas tend to take longer to slow down. Less desirable areas (e.g. when NoDa was just starting to gentrify) have enough uncertainty that small spooks can cause quick changes since you could get a good deal or you could end up in a crappy neighborhood.
metacritic12 5y ago
Is it just me or does this article does not mention the housing market at all? The second part of the title should be deleted.
- Diesel555 5y ago
  Yah I'm confused on all the comments on the housing market. Did they read the article? The first three letters of house and housing, "hou", are not even on the website. We can debate on if the market is cooling.... but not based on this article. It mentions the DIY market, but that's still a leap to the overall housing market.
- dang 5y ago
  Yes, the submitted title ("Lumber prices fall 30%; housing market cools") broke the site guidelines, which ask "Please use the original title, unless it is misleading or linkbait; don't editorialize." The article isn't about the housing market. The editorialized title triggered an off-topic discussion. We've reverted to the article title now. Accounts that keep doing that eventually lose submission privileges on HN, so please don't do that!
omgJustTest 5y ago
This article only talks about futures markets for lumbar (in particular the July futures)... so what this means is that in a few months lumber might be cheaper than expected. No direct connection is made as indicated in the title. There has been news that pre-closing processes saw a decline, but those indicators are future predictors of sales and not a direct drop in sales. TLDR: this article is not talking about what's happening today in the housing market, just about future projections.
deleted 5y ago
[deleted]
donclark 5y ago
Whats weird is, in Marietta GA, my neighbor told me yesterday that in project that my neighbor started 3 months ago - prices have almost doubled since he started the project. Which means pricing and availability vary wherever you are.
- thederf 5y ago
  Rockmart GA, pretty much the same story here. Wonder if consumer prices are delayed relative to futures.
ramesh31 5y ago
Is this general inflation of all building supplies, or specifically just lumber? I'm curious if anyone knows if there are alternatives to lumber that would be more feasible at these prices.
- quesera 5y ago
  Metal studs are popular for replacing 2x4s in walls. They have a lot of advantages over standard white pine. They're still more expensive, but $11 (metal) vs $9 (WP) is less of a premium than the usual ~2x.
donclark 5y ago
Maybe there is an opportunity here for someone to create a reliable website/dashboard that shows the status of futures, pricing, etc. and can charge for access?

186 points by clove 5y ago

homes are still popping up at every corner here in GA... the housing prices didn't drop as fast as I was anticipating... sold my home in 2021

p1necone 5y ago
People like to talk about housing prices as if it's just a simple supply issue which can be fixed by building more houses, but it doesn't seem that simple to me. Sure, there might be a lack of supply... for speculative investment. But in terms of there just being enough houses for the population to /live/ in, aren't we already there? There's no cap on "need" for housing investment, if it continues to be profitable, people will keep investing in more property - you'll never reach a point where you've built "enough" for prices to get under control.
- HFguy 5y ago
  No, there are simply not enough houses relative to demand. Just having enough space to house everyone not enough.
  - nemo44x 5y ago
    That’s not true. There aren’t houses in places people wish they could live on their salary/savings. Plenty of affordable houses in many places if people were willing to live there.
- orange_joe 5y ago
  A big part of the problem is distribution, a home in Akron isn’t as valuable to society as a home in SF/NYC. People are locked out of opportunity (which doesn’t just enrich the individual but broader society though taxes and more efficient labor) through lack of housing.
  - jcadam 5y ago
    > a home in Akon isn’t as valuable to society as a home in SF/NYC. What an odd thing to say.
    - seanmcdirmid 5y ago
      If Akron had a hot economy with high paying jobs, its housing would surely be more valuable.
    - rcpt 5y ago
      It makes perfect sense if you're concerned about the economy https://www.google.com/amp/s/www.nytimes.com/2017/09/06/opinion/housing-regulations-us-economy.amp.html https://www.google.com/amp/s/www.nytimes.com/2017/09/06/opin...
  - selimthegrim 5y ago
    Akron is not devoid of contributions to industry (the university has cut some departments lately) -signed, child of two UA alums who went to Caltech. I know another UA alum from my HS (https://www.linkedin.com/in/stanwang/ https://www.linkedin.com/in/stanwang/) who has done quite well building venture backed companies.
    - orange_joe 5y ago
      I don’t doubt that many have achieved great things in Akron, but was rather arguing that the relative level of opportunity is lower in Akron (median income 23K) than SF (54k) or NYC (32K). The typical person is more economically productive in cities like NYC or SF.
  - vsskanth 5y ago
    I used to live in Akron. The tire, rubber and chemical industries are big and have a lot of high paying jobs. This is not even taking Cleveland into account which is a massive medical hub. Looking at just the city is misleading. You need to look at the desirable suburbs between Akron and Cleveland (ex. Hudson). They're massive, expensive homes there. I understand what you're saying but Akron probably isn't the most ideal example for your comparison.
- refurb 5y ago
  If you keep building at some point it becomes unprofitable to invest in housing. And what is more likely is we see housing prices drop, a massive pullback and an oversupply.
  - iknowSFR 5y ago
    Except that most builders are investors in the SFR space. In the end, we’re expanding rental availability, not first-time home owners.
    - refurb 5y ago
      Why not first time homeowners? It all depends on returns.
      - tormock 5y ago
        Because renting is unlimited income and selling is a one time income?
        refurb 5y ago
        Look up the "time value of money", NPV and return on investment.
- rgarrett88 5y ago
  Nobdy wants to lose money leaving their real estate investment empty. Vacancy rates are low. If we had "enough" homes it wouldn't be profitable to speculate. Most peope agree we're in a housing crisis. We need to be focusing on making it legal to build more housing rather than worrying about if people are making money owning homes.
  - p1necone 5y ago
    I'm not saying we shouldn't be doing those things (making it easier to build new houses). I'm just saying it seems naive to think that that /only/ doing that will make houses affordable.
  - deleted 5y ago
    [deleted]
  - tmnvix 5y ago
    > Nobody wants to lose money leaving their real estate investment empty. Vacancy rates are low. People do leave properties empty - it's easier to do in a rising market when it will still make you money via capital gains (and leveraging equity to purchase further properties). It's worth keeping in mind that industry reported vacancy rates are typically the proportion of properties that are on an agent's books and are currently vacant. Many properties are not included (land-banked, holiday homes, AirBnB, those currently being renovated, up for sale, etc). I live in a house that is currently valued at NZD1.7M. This same house was purchased for NZD0.56M 12 years ago. That gain totally dwarfs the amount of rent the owners could have collected in that time. Consider NZ. According to Statistics New Zealand in 1991 there were 1,307,000 private dwellings and 1,252,600 households. A difference of 4.16%. In 2017 there were 1,855,500 private dwellings and 1,734,800 households. A difference of 6.5%. During this time household sizes decreased and house prices increased far in excess of inflation. In 1991 the average house was NZD173,000 (in 2016 dollars). In 2016 it was NZD495,000. Today it is over NZD1,000,000 (or about NZD900,000 in 2016 dollars). Consider Australia. Prosper Australia's Speculative Vacancies Report [0] (looking at water usage to determine under-utilised properties) suggests areas with high vacancy rates in Melbourne correlate with areas where capital gains (i.e. percentage price increases) are greatest. Desirable areas have higher vacancy rates, even approaching 20% by their reckoning. This is the opposite of what you would intuitively expect in a naive supply and demand equation. Consider the UK. A study in the UK [1] using council data found that high property prices correlate strongly with what the study refers to as 'low use properties' (LUPs). A speculative boom creates extra demand. As Ireland discovered during the GFC, when that investment demand dries up, the empty homes (and over-supply) are revealed. This will happen again and it will be when people can no longer take on more debt (most likely due to rising interest rates). [0] https://www.prosper.org.au/wp-content/uploads/2019/04/Speculative-Vacancies-9.pdf https://www.prosper.org.au/wp-content/uploads/2019/04/Specul... [1] https://theodi.org/event/friday-lunchtime-lecture-empty-homes-and-house-prices-is-there-a-relationship/ https://theodi.org/event/friday-lunchtime-lecture-empty-home...

gitfan86 5y ago

I expect this to be the beginning of a recession. A lot of consumers spending is based on the thought that their home is going up in value.

after_care 5y ago
What? We're just returning to December 2021 lumber prices. Lumber is just one input into home values. https://www.nasdaq.com/market-activity/commodities/lbs https://www.nasdaq.com/market-activity/commodities/lbs
deleted 5y ago
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lost_soul 5y ago
Just anecdotally, we went out to eat at a place we hadn't been to since before the pandemic. Their prices have doubled. We spent $50 on lunch.
- mnholt 5y ago
  Seeing the same things here, lunch is $25+ a person at casual sit down places. Some have even done away with lunch menus so you’re left with lunch portions for dinner prices.
  - break_the_bank 5y ago
    This has to be a major city right?
    - mnholt 5y ago
      Dayton, Ohio. Depends on your definition of major.
  - ipaddr 5y ago
    Feels like places trying to make up for any covid losses over the last few years.

ClosedPistachio 5y ago

Actual article title: "Lumber rally cools with transport snarls easing, buyers balking"

tormock 5y ago
- cercatrova 5y ago
  New accounts are often flagged, I just vouched for you.
  - tormock 5y ago

purple_ferret 5y ago

It's simply too expensive to do any sort of renovations at the moment. Lumber prices are just a part of it

x3sphere 5y ago

It hasn’t started cooling yet here in AZ, still seeing properties going for over list and prices are still climbing. That said I see interest rates are now approaching 5% so have to imagine it might pull back some soon, really depends on the supply though.

nemo44x 5y ago
Come to the northeast where choice properties are easily going 40% over list. Homes that sold for 800k in 2017 are going for 1.9M right now.
- mynameishere 5y ago
  I read numbers like that and I think, "Sure glad I'm not the one who'll be holding the bag on that." But then...I might be. I'm not sure. Someone's going to be making good on the money that disappears when the greater fool mails his keys back to the bank. Will it be the standard idiots Fannie, Freddy, Deutsche Bank, and whoever pulls the short straw at the NY Fed annual picnic?
  - nostrademons 5y ago
    You probably are the one holding the bag. Prices are exploding because mortgage rates are being held below the rate of inflation. In this scenario, it makes sense to borrow as much money as you possibly can and buy hard assets with it, because your mortgage is essentially a transfer of wealth from the bank to you. Normally banks would be the bagholders in this scenario, but because of securitization, they just package off the mortgage and sell it on the MBS market. The biggest buyer of MBS's lately has been the Fed, which they do with money newly injected into the market. The effect of this money creation is the inflation we've seen over the last 2 years, so effectively this has been a transfer of wealth from savers and anyone whose income is denominated in cash, to buyers and to some extent sellers of homes.
  - nemo44x 5y ago
    I’m not sure either and neither are real estate agents. My contacts there are thought we’d see a flat at best market this year. But here we are - biggest jump yet. Spoke with a notary a few days ago that said they’ve never been busier. People locking in low rates. But to me it seems like it’s going to cool fast. Rates going up. Fine if you’re long term. I went to view a house a few weeks ago listed at 1.25 and that seemed high. I asked my real stir if 1.6 gets it done and she said I doubt it - need 1.75. Heard (not published yet) a rumor it went for 1.835. Anecdotal but something seems broke. Saying that I just took out a line of credit for a few hundred thousand.

sydthrowaway 5y ago

The housing market won't cool until the political class is barred from owning multiple homes and speculating. Why would they act not in their interest?

daenz 5y ago
Wouldn't taxing uninhabited homes be more realistic and effective than banning people from owning things? If the tax hurts enough, then the prices drop so that uninhabited homes get people living in them.
- dec0dedab0de 5y ago
  I think this is the best solution. Should be for commercial property too. I've seen buildings be unoccupied for over 15 years, how can that be in anyone's best interest?
  - downrightmike 5y ago
    Owners are probably using that property to get a tax cut
    - pc86 5y ago
      If it's commercial property you're getting a tax cut whether it's rented out or not.
  - Gigachad 5y ago
    >how can that be in anyone's best interest? Often because lowering the rent lowers the value of the property which was based on its expected rental return. 15 years is quite extreme but it would often be preferable to go a few years without commercial tenants than to lower the rent and wipe out massive amounts of value.
    - alostpuppy 5y ago
      I’ve heard this before and it’s such a perverse set of incentives.

jcadam 5y ago

Maybe I can build that bookcase now....

tvb12 5y ago
Two of us! I was busy and never got around to purchasing lumber when the price of a 2x4 dropped to $3.50-ish. I didn't realize you had to time your purchases. Now I sit here, cut lists ready, wondering who is buying 2x4s for $8.30. But the price will come back down... right?
hcrisp 5y ago
Yeah, I'm finishing a basement and the select 2x4 studs were over $9 last week. So I went with economy studs for $4.35 but you have to really pick through them to get good ones. I went back to get more and now they are sold out - other people probably figured out they can do similar. If this news holds maybe we can see a drop soon at the box stores.

deleted 5y ago

[deleted]

sb057 5y ago

>Futures tumbled to US$974.80 per 1,000 board feet on the Chicago Mercantile Exchange on Friday, heading for a sixth straight decline. For comparison, it was $403.60 at the start of 2020: https://tradingeconomics.com/commodity/lumber https://tradingeconomics.com/commodity/lumber

thematrixturtle 5y ago
This. Lumber prices are down 30% since March 1st, but still 250% up since COVID.
- EVa5I7bHFq9mnYK 5y ago
  Isn't it 150%? Percentages are hard.
  - thematrixturtle 5y ago
    If pre-covid index is 100, the current price is 250, which can be expressed as either 250% of the previous price or a 150% increase in price (up by 150%). English is hard.
sandworm101 5y ago
Ya, the price bubble hasnt really burst. It just deflated a little but remains a bubble.
- after_care 5y ago
  Why do you say lumber is a bubble? It seems to me all of the lumber being produced is being used, and lumber is a limited and valuable natural resource. I don't see how lumber supply suddenly increases or lumber demand suddenly decreases.
  - stjohnswarts 5y ago
    the price is a bubble not the volume. As supply goes up then the price will drop as demand is staying the same or dropping a bit depending on who you ask.

apetresc 5y ago

From the article: > “I think the price decline is tied to the DIY (do-it-yourself) sector slowing down due to high lumber prices, with people spending their money on other things like travel,” said Russ Taylor, president of Russ Taylor Global in Vancouver. So their expert analysis is that lumber prices are falling because lumber prices are high?

ravi-delia 5y ago
Eh, I could see it. A lot of the lumber price increases were due to logistical issues up and down the supply chain, those same issues would cause this kind of lag. If supply adapted fast enough it wouldn't be an issue, but if supply adapted fast enough prices wouldn't have gotten that high regardless. Besides, things are weird right now, consumers aren't as able to act rationally because they aren't used to it.
- mblock 5y ago
  It actually stops mills from working if high prices stop people buying, which turns the price down until mills can restart operations.
lupire 5y ago
Sure. Prices hit an unsustainable level, soaked up the small bit of demand at the peak, and then declined to find more demand. Econ 101
- ravi-delia 5y ago
  In all fairness to OP, Econ 101 would hold that for the price to change you'd need a supply or demand shift. So if prices got as high as they did, the prices alone wouldn't bring it back down. By 102, of course, slight (or in the current lumber market, enormous) lag in the supply chain and largely habit-driven consumers make for more bumpiness on the way to equilibrium.
JimtheCoder 5y ago
The best cure for high prices are high prices

rcpt 5y ago

What reasonable place do people live where the price of lumber has anything to do with housing? California property market is a full on casino. When you buy here all you're getting is a leveraged bet that you'll be able to sell it for more to a greater fool. It has nothing to do with fundamentals especially not the cost of materials.

seanmcdirmid 5y ago
Considering how much wood they go through and how housing structure always depreciate rather than appreciate (even if the land appreciates, the market for a second hand house is small), Japan.
- galangalalgol 5y ago
  Why are new buildings preferred? In the US people like older houses, even when they are poorly built.
  - seanmcdirmid 5y ago
    https://robbreport.com/shelter/home-design/japanese-homes-are-ephemeral-facing-demolition-just-22-years-in-heres-why-1234608438/ https://robbreport.com/shelter/home-design/japanese-homes-ar...
  - fomine3 5y ago
    We like newer buildings as same as newer cars. It's comfortable overall. Why you like older buildings ?
    - galangalalgol 5y ago
      Many here like to keep old cars too, you regularly see cars from the 1950s still driving. Older houses like older cars have been tested by survivor bias. Older things stand out a bit too, so it is a way to be individualistic. A way to connect to the past too. Even if it wasn't your ancestors that built a house, learning about the people that did, and living where they lived and died is an interesting experience. In many cases the workmanship is something that could not be repeated given modern labor rates. So lots of little reasons. Also our modern homes don't vary as much as yours, they all look roughly similar. So an old house might be selected just to avoid the current popular design.

ryanSrich 5y ago

I’m not buying this, at least not for desirable areas. In the last 48 hours I’ve seen 6 houses close. Every single one in under 30 days (signifying significant, if not entirely cash offers), and each roughly 110-185% of asking price. Yes. One house I tracked on Redfin listed at $722k and sold for $1.31m. Most houses in the average zones are going for well over asking price. It’s not even a matter of competitive offers. It’s almost as if the asking price doesn’t even matter. The market is essentially converging on what can only be described as silent auctions. You come in with the highest amount you can pay or whatever you’ve been prequalified for and hope it’s high enough. But when 20-50 people are bidding on a single house it’s unlikely you’ll ever be near the top. It’s really hard to explain to people that aren’t following the market just how bad it is.

deelowe 5y ago
There are a lot investors out there right now. I get cold calls daily. As interest rates climb and supply shortages improve, I expect things to cool off. Probably not until after summer as sales always increase up until schools starts back,
gnicholas 5y ago
Could this be people shifting investments from other asset classes toward real estate, to be more inflation-proof?
NegativeLatency 5y ago
A close friend just bought a house in a largeish west coast city and it was as you described and worse than my experience buying a house about 1.5 years ago
dominotw 5y ago
> . One house I tracked on Redfin listed at $722k and sold for $1.31m. do you have a link by any chance?
- ryanSrich 5y ago
  Sure. I have a few. $220k over ask- https://www.redfin.com/CO/Centennial/7405-S-Quince-Ct-80112/home/34887965?600390594=copy_variant&231528114=control&utm_source=ios_share&utm_medium=share&utm_nooverride=1&utm_content=link&utm_campaign=share_sheet https://www.redfin.com/CO/Centennial/7405-S-Quince-Ct-80112/... $230k over ask - https://www.redfin.com/CO/Centennial/7963-S-Clayton-Cir-80122/home/35006066?600390594=copy_variant&231528114=control&utm_source=ios_share&utm_medium=share&utm_nooverride=1&utm_content=link&utm_campaign=share_sheet https://www.redfin.com/CO/Centennial/7963-S-Clayton-Cir-8012... $297k over ask - https://www.redfin.com/CO/Boulder/5640-Table-Top-Ct-80301/home/35306632?600390594=copy_variant&231528114=control&utm_source=ios_share&utm_medium=share&utm_nooverride=1&utm_content=link&utm_campaign=share_sheet https://www.redfin.com/CO/Boulder/5640-Table-Top-Ct-80301/ho... $269k over ask - https://www.redfin.com/WA/Seattle/3829-Ashworth-Ave-N-98103/unit-B/home/8190276?600390594=copy_variant&231528114=control&utm_source=ios_share&utm_medium=share&utm_nooverride=1&utm_content=link&utm_campaign=share_sheet https://www.redfin.com/WA/Seattle/3829-Ashworth-Ave-N-98103/... $311k over ask - https://www.redfin.com/WA/Bellevue/12810-SE-29th-St-98005/home/508320?600390594=copy_variant&231528114=control&utm_source=ios_share&utm_medium=share&utm_nooverride=1&utm_content=link&utm_campaign=share_sheet https://www.redfin.com/WA/Bellevue/12810-SE-29th-St-98005/ho... $425k over ask - https://www.redfin.com/WA/Bellevue/90-145th-Pl-SE-98007/home/427153?600390594=copy_variant&231528114=control&utm_source=ios_share&utm_medium=share&utm_nooverride=1&utm_content=link&utm_campaign=share_sheet https://www.redfin.com/WA/Bellevue/90-145th-Pl-SE-98007/home... Looks like they changed the record history, but this was the one I was talking about - https://www.redfin.com/WA/Bellevue/2004-144th-Ave-SE-98007/home/509294?600390594=copy_variant&231528114=control&utm_source=ios_share&utm_medium=share&utm_nooverride=1&utm_content=link&utm_campaign=share_sheet https://www.redfin.com/WA/Bellevue/2004-144th-Ave-SE-98007/h...

ramesh31 5y ago

I'm building instead of buying. Unless you are dead set on a particular neighborhood it makes no financial sense to buy anymore. You can build a brand new 300k house on a 100k lot and have a 500k home with positive equity the moment you close.

devy 5y ago
Unless it's prefab house(aka modular home), it's gonna take you at least 6 month from the signing the contract of getting a lot to the house fully built. Labor market have been really heating up too - most of the builders are focusing building $1MM+ homes in premium districts definitely not worth their time to build a $300k home when they can build a million dollar home. If you are building the home yourself, good luck it's gonna take longer even if you are not working full time and can build house full time.
- ramesh31 5y ago
  >Unless it's prefab house(aka modular home), it's gonna take you at least 6 month from the signing the contract of getting a lot to the house fully built. Fully aware it's going to be a 1yr+ long process. But after going through the housing market gauntlet and flat out refusing to do the insane stuff it takes to even get an offer accepted now (waived everything, 10%+ earnest money, etc., etc.) I couldn't care less about the wait.
turtlebits 5y ago
No offense, but if there's a 100k lot, it's because noone wants to live there.
- deleted 5y ago
  [deleted]
- atwebb 5y ago
  No offense, a statement like that (and the OP) without factoring in location means nothing. There are definitely 100k lots in places people want to live, some of them are pretty big. While everyone may not want to live there, there will be plenty of buyers.

jollybean 5y ago

Lumber is not an indicator of much, because distribution is a bit artificial. A lot of places have been sitting on lumber to keep prices high - a kind of distributed/collective collusion. I don't know for sure, but I believe the same thing happens to gas prices, whenever there is a reason for gas stations to jack up prices, they do, and justify it by 'oh there's a war in XYZ country'. Or if the headlines say 'Oil Shock' - then the bump up prices even though the pricing has not hit them at all. They can just get away with it, and they know it. So they all just do it and hold out until some of them 'blink' and prices come down. As far as the 'new home' anecdotes, I'm not sure if NYC/SF are ever very good barometers overall. Some places are designed to have demand. Just pop out into the exaburbs and see what's happening there. Or Orlando. Or Atlanta. etc..

Tiktaalik 5y ago

Rising interest rates will cool the market but that doesn't mean that the demand has vanished. People will simply remain longer in misery in their existing housing that doesn't suit their needs.

AYBABTME 5y ago
Some relative "misery"; if they can afford to own a house, they're probably not that miserable.
- dragonwriter 5y ago
  Being able to get a loan to buy a home in the past doesn't imply being able to afford to own it now, especially if the loan was an ARM, had an interest-only or negative amortization period, etc. (but even with a conventional fixed mortgage, financial situation can change for the worse after buying.)
  - AYBABTME 5y ago
    This or not, having a house is pretty far away from "misery" in my book. At least you've got a roof over your head and no landlord to price you out of your home into the streets.

bricemo 5y ago

Time to build.

vsskanth 5y ago

Not yet. Single Family Homes still going under contract the first weekend they list in desirable Charlotte NC suburbs. This is in addition to atleast 3 new construction developments within a couple miles of each other where I live, all priced 20% higher than existing homes. Looks like there's still demand out there.

saltminer 5y ago
Hey, neighbor! The desirable areas tend to take longer to slow down. Less desirable areas (e.g. when NoDa was just starting to gentrify) have enough uncertainty that small spooks can cause quick changes since you could get a good deal or you could end up in a crappy neighborhood.

metacritic12 5y ago

Is it just me or does this article does not mention the housing market at all? The second part of the title should be deleted.

Diesel555 5y ago
Yah I'm confused on all the comments on the housing market. Did they read the article? The first three letters of house and housing, "hou", are not even on the website. We can debate on if the market is cooling.... but not based on this article. It mentions the DIY market, but that's still a leap to the overall housing market.
dang 5y ago
Yes, the submitted title ("Lumber prices fall 30%; housing market cools") broke the site guidelines, which ask "Please use the original title, unless it is misleading or linkbait; don't editorialize." The article isn't about the housing market. The editorialized title triggered an off-topic discussion. We've reverted to the article title now. Accounts that keep doing that eventually lose submission privileges on HN, so please don't do that!

omgJustTest 5y ago

This article only talks about futures markets for lumbar (in particular the July futures)... so what this means is that in a few months lumber might be cheaper than expected. No direct connection is made as indicated in the title. There has been news that pre-closing processes saw a decline, but those indicators are future predictors of sales and not a direct drop in sales. TLDR: this article is not talking about what's happening today in the housing market, just about future projections.

deleted 5y ago

[deleted]

donclark 5y ago

Whats weird is, in Marietta GA, my neighbor told me yesterday that in project that my neighbor started 3 months ago - prices have almost doubled since he started the project. Which means pricing and availability vary wherever you are.

thederf 5y ago
Rockmart GA, pretty much the same story here. Wonder if consumer prices are delayed relative to futures.

ramesh31 5y ago

Is this general inflation of all building supplies, or specifically just lumber? I'm curious if anyone knows if there are alternatives to lumber that would be more feasible at these prices.

quesera 5y ago
Metal studs are popular for replacing 2x4s in walls. They have a lot of advantages over standard white pine. They're still more expensive, but $11 (metal) vs $9 (WP) is less of a premium than the usual ~2x.

donclark 5y ago

Maybe there is an opportunity here for someone to create a reliable website/dashboard that shows the status of futures, pricing, etc. and can charge for access?