Lumber Pricing Lunacy
Issue 27 - April 9th, 2021
The price of lumber in America is at all time highs. The shortage of lumber available is just another weird phenomenon that emerged during 2020 and continues to persist as we ramp back up in 2021. As of market close yesterday, lumber was trading at $1,106.40 per 1,000 feet of board which is an all time high and some analysts in the industry think it could keep surging higher. The pricing is up close to almost 200% since the pandemic started, and The National Association of Home Builders calculates that current lumber prices are adding at least $24,000 to the price tag of a typical new single-family home.
This price shock is a classic example of the supply and demand curve. Supply has fallen as a result of COVID-19 restrictions hampering sawmills throughout last year all over the world. In 2020, Americans rushed to Home Depot and Lowe’s to pursue home renovations or do-it-yourself projects during quarantine which increased the demand for timber to unfathomable highs. The matter is made worse by low interest rates and tight existing home inventory which has caused new home builders to ramp up production. The demand for new homes is so high that even during an economic crisis we hit a 14-year high in new housing “starts” in December 2020.
Some worry that the shortage in the current supplies markets is pushing new home prices into bubble territory as prices could soften or level out on new homes later this year as the lumber markets calm down. Home buyers are so desperate all over the country right now that a slight push in price right now doesn’t feel like a lot when compared with the insane market dynamics, but in a year those people may feel like they have overpaid if new construction supply ramps back up and lumber prices settle down. Only time tell well, but the lumber price problem is one of those weird things no one would have predicted pre-pandemic that will forever be on everyone’s mind over the next few years as the industry evolves. Will this crisis further push the modular housing market to become more mainstream? Modular housing and supplies only make up about 5% of the construction supply and building industry currently, but problems and crisis fuel innovation. It will be interesting to see how the lumber industry and construction supply chains and materials evolve and shake out over the course of the year.
Podcast Highlight To Learn More:
The Fort with Chris Powers: #123: Stinson Dean - "Lumber Industry 101": On this episode, Stinson Dean (www.Twitter.com/LumberTrading), the Founder of Deacon Lumber, joins Chris to provide a deep dive into the Lumber industry. Stinson explains his role as a Lumber trader, why most homes in the US are built from Canadian Lumber, the tariff issues between the US and Canada, the Lumber supply chain, and why we are seeing the highest prices ever recorded.
Newsworthy Links To Share
“Compass Needs To Flip The Narrative”: Compass Inc. is the latest example of a business that seemed to try to be something it wasn’t. Much like WeWork, an office-sharing company that was valued like a technology platform, Compass is a real-estate brokerage company that appeared to be in the business of cloud-based software. (WSJ)
Notarize is opening up their “remote online notary” tool to independent notaries who are not part of their platform. The new opening will allow notaries to serve their client base through the Notarize platform, bring their own business onto the Notarize Platform and convert their business and relationships to a digital platform. Adoption of RON (remote online notarization) soared 547 percent in 2020, according to a survey from the American Land Title Association, and now RON transactions are currently approved in 31 states. (Inman)
Zillow just released the results of its latest survey on relocation patterns for U.S. citizens during the pandemic. Austin and Dallas-Fort Worth are the top destinations for California migrants, while Miami and Charlotte are the top hot spot for New Yorkers. (Fort Worth Business Press)
Los Angeles developer Rick Caruso to allow commercial and residential tenants in all of his properties to pay rent in Bitcoin. In what may be a real estate industry first, bitcoin will now be accepted for residential and commercial rent at the Grove shopping center and other properties owned by Caruso. One of his first tenants to pay in bitcoin may be Elon Musk and Tesla who operate a store selling Tesla electric cars at the Americana at Brand center in Glendale. (LA Times)
Loanpal, a provider of residential-solar loans in the U.S., is planning an initial public offering this year that could value the company at more than $10 billion. Solar lending has been a key tool in the surge of residential-solar installations in the U.S., which reached a record last year. Investors over the past year have clamored for stocks tied to the long-term trends of electrification and decarbonization. (Bloomberg)