Lumber Price Dropping?

Question

According to this Wall Street Journal article, lumber prices are finally dropping. Is this the beginning of a crash or are we going back to ”normal”? I would like to here your opinions.

https://www.wsj.com/articles/lumber-prices-are-falling-fast-turning-hoarders-into-sellers-11623749401

Mike Dymski · Answer

Focus on what we can control...agents, brokers, owners, and offers.  The rest is just noise.  And a hot housing market is a good thing for us investors!

Chris Szepessy · Answer

I couldn't read the whole article without subscribing, but my guess is that the factories finally caught up to the demand. I'm far from an economic expert, but it seems like simple supply/demand.

Joe Splitrock · Answer

@Ryan Coovert this is just how supply and demand works. Demand dropped early in the pandemic and supply dropped. Demand picked up later in the pandemic and supply couldn't ramp up fast enough. The result was skyrocketing prices. When prices got high, lumber producers added extra capacity to meet the demand. Paying overtime or running a second shift makes sense when prices have doubled. As producers ramp up, supply increases and prices start to drop. I wouldn't expect a crash or even full return to pre-pandemic prices. Also be aware that wholesale prices take some time to translate to retail prices.

One other factor that helps is seasonality. The spring and early summer are always peak demand for lumber. As we move towards fall and winter, demand seasonally decreases which will help with supply issues and prices.

Joe Splitrock · Answer

Even with the drop, they are still well above pre-pandemic. There was never a tree shortage, so the price hike was all about producers not keeping up with demand. I think another factor hitting now is constrained demand. They are building like crazy in my city, but if you want to hire a contractor, they are booked out until September. That means any wood they need for projects this summer is probably already quoted and contracted. There are also people who chose to not do projects due to prices being too high.

I don't think all lumber is going down in price. I was talking with my contractor about a deck I need done and he said Cedar is still ridiculously high. He told me about twice the cost of composite for decking.

Overall it is a good sign that prices are showing relief, however without labor to build, it may not help the housing shortage.

Ryan Coovert · Answer

@Chris Szepessy supply has increased now that the world is opening up. High lumber prices has caused home prices to run up higher and higher. I’m wondering in the sudden drop in lumber prices will make homes do the same ￼⬇️. I would like to this housing market to cool off a bit. Which would allow investors to purchase more investment properties.

Steve Vaughan · Answer

My local Home Cheapo still selling 2x4x8 studs for $8.39    Just looked it up.  WTH?  No way I'd do an optional project in this environment.

I saw the reference you did.  What was $1437 per 1000 bf is now $1000. I guess normal is like $637.

Shop around until the trickle down savings reaches us minions.

Stephen Johnston · Answer

anecdotal evidence: sawmills around NC and Mississippi are running Full Tilt Boogie! Lumber like most other commodity booms should come back down as producers ramp up to take advantage of the higher prices.

Daniel B. · Answer

@Ryan Coovert

Dropping from its peak that it hit recently, still up from a few months ago.  Lumber prices traditionally $300-$400.

Many predict it will drop another $100 after summer, but that is still over double traditional prices and lumber materials is the biggest material cost on a new build…

Caleb Brown · Answer

Shouldn't change prices. There has been slightly more inventory hit(a couple months ago supply was .7% now .8%, woo) but market stays hot till Nov. Interest rates have been going up a little but still there is no inventory and an influx of buyers. Stats for our market prices up 22.2% compared to May 2020, inventory down 55.6% compared to May 2020.

Scott Mac · Answer

It doesn't work like that. That's some restaurants business model. Ingredients cost I so charge I (x) y%.

New homes are priced at whatever the market will bear (often at Rape-acious Profits).

When lumber goes up (if the market will bear)--prices will go up, but that would be independent of the price of the lumber.

When Lumber prices go up, either the lumber companies, or forest owners or loggers are biting into the Rape-acious Profits of the builders.

(Builders will come on here and probably say "I don't make Rape-acious Profits"...Some do--some don't---b/c some can and some cannot.) Many do. Not small outfits, but larger nationwide ones.

On the downside--when TSHTF in the economy, they are eating Ramen for three meals a day. Feast or Famine.

Lumber Price Dropping?

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