Why homebuyers don’t see savings from falling timber prices

The contractor will work on the roof of a house under construction in the Stillpoint district of Sumter, South Carolina, on Tuesday, July 6, 2021.

Mica Green | Bloomberg | Getty Images

Timber prices in the future market have given up all profits this year and have fallen by more than 50% in the last few months. But homebuilders, homebuyers, and homeowners looking to renovate haven’t seen their savings yet.

Lumber prices hit a record high on May 7, closing at $ 1,670.50 per 1,000 board feet.It was more than 6 times theirs Coronavirus pandemic Low in April of last year.

The surge was due to a pandemic surge in demand and a shortage of supply. The sawmill was initially closed and could not launch production fast enough to meet new demand from builders and mods. Homebuyers and homeowners alike wanted more space, which meant more timber.

Now the demand for mods is declining as people spend more money on vacations instead. Homebuilders are still seeing strong demand, but construction is delayed due to high costs. The sawmill is back online, but many are having trouble finding enough workforce.

Lower timber prices are a welcome sign, but not yet a reality on the retail side. Timber prices have also risen almost 100% since last spring.

“The price of timber packages estimated by builders hit a record high as price declines began to catch headlines,” said David Logan, senior economist at the National Association of Home Builders. “In economics jargon, the price paid by a builder, or the price of a” street “, was” sticky. ” This dynamics can be primarily due to the significant difference between the dealer’s inventory shipping costs and the selling and selling prices of inventory. “

According to Logan, lumber package prices estimated by homebuilders are still record highs. Of course, retailers want to buy products cheaply and sell them high, so despite what the futures market says, they are still selling their inventories at higher prices. Also, given the surge in demand and supply chain issues, there is no reason to lower prices as inventory is low and demand is still there. But that will change in the coming months.

Michael Goodman, director of specialty products at Sherwood Lumber, a national wholesaler and distributor in Palmer, Massachusetts, said: Sherwood purchases from factories in North America and Europe and ships directly to customers.

Goodman said he is now seeing more products on the market.

“Everyone is trying to hold up as much as possible, but the market will find a way. Perhaps in the end, prices may rise due to inflation, but we’re definitely in a housing boom. That’s not the case, “it seems to disappear.”

While the price of softwood is declining, the price of other wood products such as oriented strand board (OSB), a type of laminated lumber used for panels, is 325% year-on-year and 500% higher than before. It is rising. Pandemic level due to supply chain issues.

Steel products used as inputs to steel building materials have not yet leveled off, with prices rising by about 70% in the first few months of 2021.

“Constructors are tackling building materials, building lots, a shortage of skilled labor, and a tightly regulated environment, which puts upward pressure on home prices and continues to be in strong demand in low-stock environments Nevertheless, we have set aside many future homebuyers, “said Robert Dietz, chief economist at NAHB.

–CNBC’s Lisa Rizzolo contributed to this article.

Why homebuyers don’t see savings from falling timber prices

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