11 ms·

Lumber Prices Slump

94 points by lxm 4y ago

100xdang 4y ago
Lies, realtors told me the market was red hot "with no end in sight" and I'm sitting pretty on $1.2m new construction in Goodyear Arizona.
- krallja 4y ago
  My realtor just sent out a newsletter today: “Housing Sales Are Taking A Breath If you've been anxious over being able to buy a home, you'll like the latest news from the National Association of REALTORS (NAR) and the Mortgage Bankers Association (MBA). In February 2022, existing home sales were down 2.4% from one year ago and down 7.2% from the month before. Supplies of unsold homes totaled 870,000 units, up 2.4% from January, but remain 15.5% lower than a year ago (1.03 million.) The supply is 1.7 months at the current sales pace, up from 1.6 months in January. The median existing-home sales price rose to $357,300, up 15.0% from a year ago ($310,600), marking 120 consecutive months of year-over-year price increases. This is the longest-running streak on record, according to NAR. Rising interest rates are conflating with rising home prices, impacting new home construction and sales. With mortgage interest rates a full point higher than they were a year ago, new home purchase applications were down for the third consecutive month. Sales were the lowest in seven months at 791,000 units. Mortgage applications for new home purchases decreased 3.9% year-over-year in February 2022. The good news is you may be able to get a proverbial foot in the door soon.”
jmyeet 4y ago
This one isn't at all surprising because it was clear from the outset that the "shortage" of lumber from the outset was artificial ie supply was being held back. You could maybe argue there were transport issues getting lumber from lumber yards but that's a stretch. What I think a lot of people are learning is that a lot of these "shortages" and supply chain issues are entirely opportunistic and artificial. Prices are going up because prices are going up.
- libertine 4y ago
  What if these are just a symptom of a despicable human behavior called "hoarding"? You can argue some hoarding is motivated by fear, but a lot of it is motivated by greed. I know friends working in the construction business claiming some people just upfront bought whole stocks cement during the pandemic for example. Probably a lot of these purchases are done with funny money because money was being thrown around for cheap. So I'd imagine people would ask a higher price because funny money allowed to pay those prices, all due to the greedy hoarding behavior - at the end of the funnel people were paying stupid prices for housing for example, so why not? That same friend also said that they simply had to go and buy it from the secondary market for a premium. How do you solve this problem in the future? Are quotas the solution?
  - callmeal 4y ago
    >What if these are just a symptom of a despicable human behavior called "hoarding"? It's only "despicable" if an individual does it. But "gains advantage" when you're a company. See: https://www.nytimes.com/2007/11/28/business/worldbusiness/28iht-hedge.4.8517580.html https://www.nytimes.com/2007/11/28/business/worldbusiness/28...
    - baremetal 4y ago
      i call it hedging, not hoarding :)
  - JumpCrisscross 4y ago
    > What if these are just a symptom of a despicable human behavior called "hoarding"? It’s not despicable, it’s risk adjusting by carrying inventory. (If you inventory more than you can use, and it’s perishable, it’s a different problem.)
    - libertine 4y ago
      Well it's despicable because of the consequences. In a localized market, people adjusted their risk by stocking up toilet paper, canned goods, etc. Those who couldn't afford it, or came too late, were left with nothing. In a globalized market those who have access to free money can hoard as much of it as they want. As a consequence it spreads like a disease. You may say, in the case of the USA: "well, I guess that's the perks of being in control of the standard currency for global transactions, the rest just has to deal with it" -> this won't end up well for anyone.
mindslight 4y ago
It's messed up how the financial press uses negative words to describe good developments, presumably because some speculators may be losing money. Prices didn't "slump" - lumber became more affordable. The housing market isn't going to "shoulder the load" of lower monetary inflation - rather the housing market may regain some sanity as the Fed stops printing so much free money. I say this as someone who is long in real estate (> 1 piece), too. I consider that investment to be a hedge, and if the price of real estate ever were to actually "crash" (>70% drop) I would see it as a fantastic thing for our society to not be held moribund by extractive rents.
Simon_O_Rourke 4y ago
The only issue might be that downstream impacts are a few months away yet - take for example a property development not too far away from me here. Four and five bedroom houses went on the market initially at $700k, then were all withdrawn, and put back up for $850k "because of the increase in general costs of construction materials". This slump is going to have very expensive properties selling at way above their build price.
mothsonasloth 4y ago
When can I see a slump in the UK when I go to Jewsons/Travis Perkins/B&Q? I just checked the price of a sheet of OSB, or a piece of CLS and its still bloody high. I paid £18 in 2018 for a 1.2 x 2.4 18mm OSB sheet, now its £35...
- rco8786 4y ago
  My understanding is that it can take on the order of weeks to months for prices at the yard to be reflected at retail.
  - tonyarkles 4y ago
    If nothing else, the time it takes to turn over some fraction of the inventory that was bought when wholesale prices were high.
- MafellUser 4y ago
  Not in a while. We don't manufacture sheet goods here, everything is imported. Loads from Europe, loads from China, loads from Russia, so I don't see how the supply can improve in the near future. British Gypsum (owned by Saint-Gobain, also owner of Jewson) brought some plasterboard manufacturing back onshore, previously they were all imported from Germany, after Brexit. The UK made plasterboards are inferior, very crumbly , don't break cleanly, and they cost more. And that's for something we already have existing manufacturing capacity here. For something 100% imported like sheet goods there's even less chance prices will drop, barring a off-the cliff drop in demand. Importing more from NA won't help much given the weak pound. Not long back trades ppl had been stockpiling and passed the increased cost onto customer, reaping the profit. When you see plumbers and sparks loading up their vans with plywood you know the market is broken.
- detritus 4y ago
  I stopped tracking the increases in my plywood costs here in London once they'd breached 250% over a two year or so period, starting somewhere around the beginnings of Covid (so, not entirely wedded to lockdown issues, if memory serves). I'll welcome price decreases, but it did make me seek out a new, better supplier so hopefully 'worth it' in the end (I pass on all material costs to clients, so as long as I explain the cost increases, it doesn't really affect me.. it is galling though).
iso1631 4y ago
I take it twitter will be full of pictures showing what deflation looks like, with "March" next to a small bit of wood and "Today" next to far more wood?
bradfa 4y ago
I built a deck last summer, during the heightened wood prices. We had planned it out prior to the prices going dramatically up and it was slightly painful to my wallet, but not nearly as bad as everyone seemed to be making it out to be. Due to the unique design of my deck, we used 2x10x20' pressure treated southern yellow pine for all the joists. I paid $96 each for #1 kiln dried after treatment (KDAT) boards from a local lumber yard. At the time I bought these, Lowe's was selling wet (not KDAT) #2 2x10x20' for about $90 each. Today, Lowe's has those same boards priced at $80 each locally. So if today is after the price slump compared to last year, the prices aren't actually THAT much lower for a rather specialty size of lumber. But it might be easier to get boards now and more common sizes definitely have come down in price. I had about a 3 week wait on some of my lumber and a 2+ month delay on my composite decking boards. All in all, if I had waited to build my deck until this summer I might have saved 10-20% over what I paid last year for all my materials. But I had the time to do the work last year and I do not have the time to do the work this year. And lumber was only about 33% of the total cost of my deck build, the other 67% were non-wood items which have had pretty steady prices like composite decking, aluminum railings, connectors/bolts/screws, waterproofing materials (for under-deck storage), and concrete.
joshe 4y ago
neonate 4y ago
https://archive.ph/kd97N https://archive.ph/kd97N
skybrian 4y ago
> Lumber futures for July delivery ended Friday at $695.10 per thousand board feet, down 52% from a high in early March. [...] > Still, barring a recession, he doesn’t expect lumber prices to fall all the way back to prepandemic levels, which rarely exceeded $500 per thousand board feet. That is partly due to problems in Canada’s western forests, where mills have struggled with fire, flood, high-price and hard-to-get timber, shipping problems and duties at the U.S. border.
paulpauper 4y ago
It's sorta remarkable how well oil and gas hold their gains compared to other commodities. Oil still at 115+ 3 months after Russia invasion of Ukraine despite no further escalation of war. I wonder if someone could create a strategy of selling delta positive at-the-money strangles on oil and gasoline given the tendency of oil and gas to plateau for a long time but have high implied volatility in the interim, which means more theta capture...have to look into it. Bitcoin, gold, and others do not have this plateau pattern, which goes against the EMH.
- fny 4y ago
  If you still think EMH is valid after this cycle, I have a monorail to sell you.
  - iqkznnft 4y ago
    Would you like to make explicit to us how you define EMH and his you think that this cycle contradicts it?
    - fny 4y ago
      It's pretty clear to me that when liquidity runs rampant, valuation doesn't matter, instead momentum and herding take over. How else do you justify a 400% increase in ARKK and a collapse that occurred inline with fiscal and monetary stimulus.
- elzbardico 4y ago
  Switching oil providers is not as easy as most people think. Refining facilities are more or less matched to their feedstocks, retro-fitting to other crudes always takes some time and money. Also, adjusting production and delivery is not an instantaneous process. Especially when you substitute a pipeline-based feedstock (as Europe is doing right now) in favor of tankers. You need tanker capacity, you need to have contracts for this, you need terminals, and you need pipelines from the port to the refining facility. Things are simply not as easy and supply shocks take time and effort for resolution.
- 4y ago
Paul_S 4y ago
I'm still waiting here in the UK. I think the recent 2 years was half pandemic and half price fixing by the lumber Mafia.
- Dma54rhs 4y ago
  Dont you import the vast majority from other countries?
  - Paul_S 4y ago
    We import all our timber. Mostly from Scandinavia and baltics. Some hardwoods from Brazil. But the whole timber global wholesale market is very centralised. Maybe not as bad as Intel/AMD/ARM but same order of magnitude.
    - detritus 4y ago
      Sadly, a lot of the plywood I use comes... came from Russia. Replacements from elsewhere seems to be slow to trickle-through. A shame, because the Russian stuff was surprisingly good quality, for my needs.
    - shatnersbassoon 4y ago
      Not all our timber. In fact Scotland is ~73% self-sufficient in timber production. https://scotland.forestry.gov.uk/images/corporate/pdf/Hbook03.pdf https://scotland.forestry.gov.uk/images/corporate/pdf/Hbook0...
      - Paul_S 4y ago
        Well, send some down south then. Never seen any at any timber merchants. Maybe should've said England instead of UK. Does that self sufficiency translate to lower prices?
        detritus 4y ago
        Amusingly, my now passed ultra-SNP uncle spent a lot of his life bemoaning the replacement of the contemporary beautiful Scottish desert with huge tracts of monoculture pine trees, changing the expected beauty of Scottish landscapes with tens of thousands of dense rows of trees planted 'for the English', in turn making another form of desert. He was right in that it wasn't pretty and not much of an improvement on a [human-] degraded landscape, but I always thought he should've looked a little closer to home to see who was profiting from all that stock. It was likely his neighbours (perhaps English), not London per se.
Havoc 4y ago
At this point I’m excited about anything going down
- layer8 4y ago
  Even your karma? :)
- bluescrn 4y ago
  So long as it's not the power grid, or the Internet
  - quickthrower2 4y ago
    Or FAANG TC
AYBABTME 4y ago
We have plans for an ADU build coming up with a contractor quote made around March. In such situation, does it makes sense to request a new quote?
- oski 4y ago
  I would (no pun intended). Why not?
londons_explore 4y ago
Sawn lumber is a very storable item. It can be stored in massive quantities very cheaply with very few losses or costs. Therefore I'm surprised the market is so volatile - since almost anyone can turn that volatility into profit if they just warehouse a bunch of sawn wood. And obviously the forests themselves have even more elastic supply - it's easy to cut trees a few years early or late to meet market demand.
- MafellUser 4y ago
  Sawn wood is cheap to store but kiln dried and processed much less so. JIT also means you can't just build a lot of warehouses quickly to store them. And we're not even talking about the supply chain disruption, or the bottlenecks in processing green wood. Even sand is in short supply right now. You can argue sand is even more storable.
  - master_crab 4y ago
    Agree it's not as easy as simple as storing wood in warehouses, but the issues with sand have to do with a more permanent shortage in global supply and are not directly comparable to lumber markets. https://www.cnbc.com/2021/03/05/sand-shortage-the-world-is-running-out-of-a-crucial-commodity.html https://www.cnbc.com/2021/03/05/sand-shortage-the-world-is-r...

94 points by lxm 4y ago

Lies, realtors told me the market was red hot "with no end in sight" and I'm sitting pretty on $1.2m new construction in Goodyear Arizona.

krallja 4y ago
My realtor just sent out a newsletter today: “Housing Sales Are Taking A Breath If you've been anxious over being able to buy a home, you'll like the latest news from the National Association of REALTORS (NAR) and the Mortgage Bankers Association (MBA). In February 2022, existing home sales were down 2.4% from one year ago and down 7.2% from the month before. Supplies of unsold homes totaled 870,000 units, up 2.4% from January, but remain 15.5% lower than a year ago (1.03 million.) The supply is 1.7 months at the current sales pace, up from 1.6 months in January. The median existing-home sales price rose to $357,300, up 15.0% from a year ago ($310,600), marking 120 consecutive months of year-over-year price increases. This is the longest-running streak on record, according to NAR. Rising interest rates are conflating with rising home prices, impacting new home construction and sales. With mortgage interest rates a full point higher than they were a year ago, new home purchase applications were down for the third consecutive month. Sales were the lowest in seven months at 791,000 units. Mortgage applications for new home purchases decreased 3.9% year-over-year in February 2022. The good news is you may be able to get a proverbial foot in the door soon.”

jmyeet 4y ago

This one isn't at all surprising because it was clear from the outset that the "shortage" of lumber from the outset was artificial ie supply was being held back. You could maybe argue there were transport issues getting lumber from lumber yards but that's a stretch. What I think a lot of people are learning is that a lot of these "shortages" and supply chain issues are entirely opportunistic and artificial. Prices are going up because prices are going up.

libertine 4y ago
What if these are just a symptom of a despicable human behavior called "hoarding"? You can argue some hoarding is motivated by fear, but a lot of it is motivated by greed. I know friends working in the construction business claiming some people just upfront bought whole stocks cement during the pandemic for example. Probably a lot of these purchases are done with funny money because money was being thrown around for cheap. So I'd imagine people would ask a higher price because funny money allowed to pay those prices, all due to the greedy hoarding behavior - at the end of the funnel people were paying stupid prices for housing for example, so why not? That same friend also said that they simply had to go and buy it from the secondary market for a premium. How do you solve this problem in the future? Are quotas the solution?
- callmeal 4y ago
  >What if these are just a symptom of a despicable human behavior called "hoarding"? It's only "despicable" if an individual does it. But "gains advantage" when you're a company. See: https://www.nytimes.com/2007/11/28/business/worldbusiness/28iht-hedge.4.8517580.html https://www.nytimes.com/2007/11/28/business/worldbusiness/28...
  - baremetal 4y ago
    i call it hedging, not hoarding :)
- JumpCrisscross 4y ago
  > What if these are just a symptom of a despicable human behavior called "hoarding"? It’s not despicable, it’s risk adjusting by carrying inventory. (If you inventory more than you can use, and it’s perishable, it’s a different problem.)
  - libertine 4y ago
    Well it's despicable because of the consequences. In a localized market, people adjusted their risk by stocking up toilet paper, canned goods, etc. Those who couldn't afford it, or came too late, were left with nothing. In a globalized market those who have access to free money can hoard as much of it as they want. As a consequence it spreads like a disease. You may say, in the case of the USA: "well, I guess that's the perks of being in control of the standard currency for global transactions, the rest just has to deal with it" -> this won't end up well for anyone.

mindslight 4y ago

It's messed up how the financial press uses negative words to describe good developments, presumably because some speculators may be losing money. Prices didn't "slump" - lumber became more affordable. The housing market isn't going to "shoulder the load" of lower monetary inflation - rather the housing market may regain some sanity as the Fed stops printing so much free money. I say this as someone who is long in real estate (> 1 piece), too. I consider that investment to be a hedge, and if the price of real estate ever were to actually "crash" (>70% drop) I would see it as a fantastic thing for our society to not be held moribund by extractive rents.

Simon_O_Rourke 4y ago

The only issue might be that downstream impacts are a few months away yet - take for example a property development not too far away from me here. Four and five bedroom houses went on the market initially at $700k, then were all withdrawn, and put back up for $850k "because of the increase in general costs of construction materials". This slump is going to have very expensive properties selling at way above their build price.

mothsonasloth 4y ago

When can I see a slump in the UK when I go to Jewsons/Travis Perkins/B&Q? I just checked the price of a sheet of OSB, or a piece of CLS and its still bloody high. I paid £18 in 2018 for a 1.2 x 2.4 18mm OSB sheet, now its £35...

rco8786 4y ago
My understanding is that it can take on the order of weeks to months for prices at the yard to be reflected at retail.
- tonyarkles 4y ago
  If nothing else, the time it takes to turn over some fraction of the inventory that was bought when wholesale prices were high.
MafellUser 4y ago
Not in a while. We don't manufacture sheet goods here, everything is imported. Loads from Europe, loads from China, loads from Russia, so I don't see how the supply can improve in the near future. British Gypsum (owned by Saint-Gobain, also owner of Jewson) brought some plasterboard manufacturing back onshore, previously they were all imported from Germany, after Brexit. The UK made plasterboards are inferior, very crumbly , don't break cleanly, and they cost more. And that's for something we already have existing manufacturing capacity here. For something 100% imported like sheet goods there's even less chance prices will drop, barring a off-the cliff drop in demand. Importing more from NA won't help much given the weak pound. Not long back trades ppl had been stockpiling and passed the increased cost onto customer, reaping the profit. When you see plumbers and sparks loading up their vans with plywood you know the market is broken.
detritus 4y ago
I stopped tracking the increases in my plywood costs here in London once they'd breached 250% over a two year or so period, starting somewhere around the beginnings of Covid (so, not entirely wedded to lockdown issues, if memory serves). I'll welcome price decreases, but it did make me seek out a new, better supplier so hopefully 'worth it' in the end (I pass on all material costs to clients, so as long as I explain the cost increases, it doesn't really affect me.. it is galling though).

iso1631 4y ago

I take it twitter will be full of pictures showing what deflation looks like, with "March" next to a small bit of wood and "Today" next to far more wood?

bradfa 4y ago

I built a deck last summer, during the heightened wood prices. We had planned it out prior to the prices going dramatically up and it was slightly painful to my wallet, but not nearly as bad as everyone seemed to be making it out to be. Due to the unique design of my deck, we used 2x10x20' pressure treated southern yellow pine for all the joists. I paid $96 each for #1 kiln dried after treatment (KDAT) boards from a local lumber yard. At the time I bought these, Lowe's was selling wet (not KDAT) #2 2x10x20' for about $90 each. Today, Lowe's has those same boards priced at $80 each locally. So if today is after the price slump compared to last year, the prices aren't actually THAT much lower for a rather specialty size of lumber. But it might be easier to get boards now and more common sizes definitely have come down in price. I had about a 3 week wait on some of my lumber and a 2+ month delay on my composite decking boards. All in all, if I had waited to build my deck until this summer I might have saved 10-20% over what I paid last year for all my materials. But I had the time to do the work last year and I do not have the time to do the work this year. And lumber was only about 33% of the total cost of my deck build, the other 67% were non-wood items which have had pretty steady prices like composite decking, aluminum railings, connectors/bolts/screws, waterproofing materials (for under-deck storage), and concrete.

joshe 4y ago

neonate 4y ago

https://archive.ph/kd97N https://archive.ph/kd97N

skybrian 4y ago

> Lumber futures for July delivery ended Friday at $695.10 per thousand board feet, down 52% from a high in early March. [...] > Still, barring a recession, he doesn’t expect lumber prices to fall all the way back to prepandemic levels, which rarely exceeded $500 per thousand board feet. That is partly due to problems in Canada’s western forests, where mills have struggled with fire, flood, high-price and hard-to-get timber, shipping problems and duties at the U.S. border.

paulpauper 4y ago

It's sorta remarkable how well oil and gas hold their gains compared to other commodities. Oil still at 115+ 3 months after Russia invasion of Ukraine despite no further escalation of war. I wonder if someone could create a strategy of selling delta positive at-the-money strangles on oil and gasoline given the tendency of oil and gas to plateau for a long time but have high implied volatility in the interim, which means more theta capture...have to look into it. Bitcoin, gold, and others do not have this plateau pattern, which goes against the EMH.

fny 4y ago
If you still think EMH is valid after this cycle, I have a monorail to sell you.
- iqkznnft 4y ago
  Would you like to make explicit to us how you define EMH and his you think that this cycle contradicts it?
  - fny 4y ago
    It's pretty clear to me that when liquidity runs rampant, valuation doesn't matter, instead momentum and herding take over. How else do you justify a 400% increase in ARKK and a collapse that occurred inline with fiscal and monetary stimulus.
elzbardico 4y ago
Switching oil providers is not as easy as most people think. Refining facilities are more or less matched to their feedstocks, retro-fitting to other crudes always takes some time and money. Also, adjusting production and delivery is not an instantaneous process. Especially when you substitute a pipeline-based feedstock (as Europe is doing right now) in favor of tankers. You need tanker capacity, you need to have contracts for this, you need terminals, and you need pipelines from the port to the refining facility. Things are simply not as easy and supply shocks take time and effort for resolution.
4y ago

Paul_S 4y ago

I'm still waiting here in the UK. I think the recent 2 years was half pandemic and half price fixing by the lumber Mafia.

Dma54rhs 4y ago
Dont you import the vast majority from other countries?
- Paul_S 4y ago
  We import all our timber. Mostly from Scandinavia and baltics. Some hardwoods from Brazil. But the whole timber global wholesale market is very centralised. Maybe not as bad as Intel/AMD/ARM but same order of magnitude.
  - detritus 4y ago
    Sadly, a lot of the plywood I use comes... came from Russia. Replacements from elsewhere seems to be slow to trickle-through. A shame, because the Russian stuff was surprisingly good quality, for my needs.
  - shatnersbassoon 4y ago
    Not all our timber. In fact Scotland is ~73% self-sufficient in timber production. https://scotland.forestry.gov.uk/images/corporate/pdf/Hbook03.pdf https://scotland.forestry.gov.uk/images/corporate/pdf/Hbook0...
    - Paul_S 4y ago
      Well, send some down south then. Never seen any at any timber merchants. Maybe should've said England instead of UK. Does that self sufficiency translate to lower prices?
      - detritus 4y ago
        Amusingly, my now passed ultra-SNP uncle spent a lot of his life bemoaning the replacement of the contemporary beautiful Scottish desert with huge tracts of monoculture pine trees, changing the expected beauty of Scottish landscapes with tens of thousands of dense rows of trees planted 'for the English', in turn making another form of desert. He was right in that it wasn't pretty and not much of an improvement on a [human-] degraded landscape, but I always thought he should've looked a little closer to home to see who was profiting from all that stock. It was likely his neighbours (perhaps English), not London per se.

Havoc 4y ago

At this point I’m excited about anything going down

layer8 4y ago
Even your karma? :)
bluescrn 4y ago
So long as it's not the power grid, or the Internet
- quickthrower2 4y ago
  Or FAANG TC

AYBABTME 4y ago

We have plans for an ADU build coming up with a contractor quote made around March. In such situation, does it makes sense to request a new quote?

oski 4y ago
I would (no pun intended). Why not?

londons_explore 4y ago

Sawn lumber is a very storable item. It can be stored in massive quantities very cheaply with very few losses or costs. Therefore I'm surprised the market is so volatile - since almost anyone can turn that volatility into profit if they just warehouse a bunch of sawn wood. And obviously the forests themselves have even more elastic supply - it's easy to cut trees a few years early or late to meet market demand.

MafellUser 4y ago
Sawn wood is cheap to store but kiln dried and processed much less so. JIT also means you can't just build a lot of warehouses quickly to store them. And we're not even talking about the supply chain disruption, or the bottlenecks in processing green wood. Even sand is in short supply right now. You can argue sand is even more storable.
- master_crab 4y ago
  Agree it's not as easy as simple as storing wood in warehouses, but the issues with sand have to do with a more permanent shortage in global supply and are not directly comparable to lumber markets. https://www.cnbc.com/2021/03/05/sand-shortage-the-world-is-running-out-of-a-crucial-commodity.html https://www.cnbc.com/2021/03/05/sand-shortage-the-world-is-r...