Lumber prices too high

[Andries]

The high demand comes from virus constrained people that are now competing and paying for new houses, home reno's and all manner of residential  projects.

. . . .  But where is the money coming from? . . . . 

SD; 
New housing starts are super high here in the Eastern Prairies. 
The real estate market is red hot. 
All of the businesses that serve the "you're staying put" status of the virus lockdowns ( from home renovations to bicycles to camping trailers ) are firing on all pistons. 
Interest rates are super low and look like they're going to stay that way for a while.
Un-employment is low.
On the flip side;
Restraunts are closed or gone broke.
The airlines are whining for bailouts from the taxpayer.
Tourism is at a standstill.
The sports world is stutter starting and trying to adjust.
.
The pandemic has created new winners and losers - the money has moved from one to the other.

[stavebuyer]

The high demand comes from virus constrained people that are now competing and paying for new houses, home reno's and all manner of residential  projects.

. . . .  But where is the money coming from? . . . .

SD;
New housing starts are super high here in the Eastern Prairies.
The real estate market is red hot.
All of the businesses that serve the "you're staying put" status of the virus lockdowns ( from home renovations to bicycles to camping trailers ) are firing on all pistons.
Interest rates are super low and look like they're going to stay that way for a while.
Un-employment is low.
On the flip side;
Restraunts are closed or gone broke.
The airlines are whining for bailouts from the taxpayer.
Tourism is at a standstill.
The sports world is stutter starting and trying to adjust.
.
The pandemic has created new winners and losers - the money has moved from one to the other.

I agree 100% about the pandemic winners and losers but think its only a fleeting reallocation.

[Ed_K]

 That was lumber prices g-man. I keep an eye on the rich people down in N.Y. to see what their up to ;D >:(.

[nativewolf]

Household debt is at recent lows, people have banked a bunch of money (which is good).  This goes to show that if you cut out sports and eating out all the time and shopping to be shopping that people can actually save money.  

I like to go out to eat once in a while but am generally shocked by how many people seem to eat out 2-4 days a week.  That gets expensive real fast.  

So, we'll come out of the pandemic with consumers having saved on the order of $2 trillion in the USA.  That's a bit of money.  Just about what govt is going to spend here this year.  All in all I'd say that the govt is getting ready to spend more than we need (should have been done last year to help the people really needing it) just as we are going to be nearly all vaccinated.   So, I'd expect it to go on a while.

@wudman said a huge pine mill would open on the border of VA/NC, would not surprise me to see some other mothballed facilities reopen but I doubt much new construction.

[g_man]

That was lumber prices g-man. I keep an eye on the rich people down in N.Y. to see what their up to ;D >:(.

That's a world I don't understand. I watch local lumber prices go up and down but for a decade SPF here has been $300 +/_ a little except for one blip a couple winters ago when it went almost to $400 for a couple months.
gg

[stavebuyer]

Household debt is at recent lows, people have banked a bunch of money (which is good).  This goes to show that if you cut out sports and eating out all the time and shopping to be shopping that people can actually save money.  

I like to go out to eat once in a while but am generally shocked by how many people seem to eat out 2-4 days a week.  That gets expensive real fast.  

So, we'll come out of the pandemic with consumers having saved on the order of $2 trillion in the USA.  That's a bit of money.  Just about what govt is going to spend here this year.  All in all I'd say that the govt is getting ready to spend more than we need (should have been done last year to help the people really needing it) just as we are going to be nearly all vaccinated.   So, I'd expect it to go on a while.

@wudman said a huge pine mill would open on the border of VA/NC, would not surprise me to see some other mothballed facilities reopen but I doubt much new construction.

Only we didn't really "save". The government printed it and passed it out so we could deposit it; more less proving that it was either unneeded or unwisely distributed.

[PoginyHill]

Pandemic hasn't impacted loggers or truckers that much - nor landowners wanting to sell stumpage. Supply of logs hasn't been impacted much. Mills can't simply add a shift or capacity overnight. They rely mostly on overtime - so mill capacity hasn't increased much. But demand for finished products has skyrocketed. When people can't do cruises, travel, or vacations, they have been spending their extra money on home improvements and, evidently, new houses. I think that explains why the supply/demand thing has driven up lumber/plywood prices, but not logs.

[g_man]

That was lumber prices g-man. I keep an eye on the rich people down in N.Y. to see what their up to ;D >:(.

That's a world I don't understand. I watch local lumber prices go up and down but for a decade S/P logs here has been $300 +/_ a little except for one blip a couple winters ago when it went almost to $400 for a couple months.
gg

[mike_belben]

Its all a house of cards.  The next recession will make 09 look like a warmup. 

[nativewolf]

Some of you may find this interesting, research paper from Deloitte discussing inflation and federal reserve policy.  

Federal Reserve monetary policy in 2020 | Deloitte Insights

The Fed is legally required to create full employment and keep prices stable- one thing they can do to create full employment is make sure money is everywhere to create jobs.   If congress wanted to change the mandate of the Fed they could, they don't even discuss changing it (not during 2007/08 housing bust and not now). 

@stavebuyer This paper gives a really good overview of the issues facing the fed.  Also, why the vaccine is so important if one is concerned about monetary policy.  For those concerned with coming inflation it is a good read, helps to understand the drivers.

[g_man]

That was lumber prices g-man. I keep an eye on the rich people down in N.Y. to see what their up to ;D >:(.

That's a world I don't understand. I watch local lumber prices go up and down but for a decade S/F logs here has been $300 +/_ a little except for one blip a couple winters ago when it went almost to $400 for a couple months.
gg

[Claybraker]

Household debt is at recent lows, people have banked a bunch of money (which is good).  This goes to show that if you cut out sports and eating out all the time and shopping to be shopping that people can actually save money.  

I like to go out to eat once in a while but am generally shocked by how many people seem to eat out 2-4 days a week.  That gets expensive real fast.  

So, we'll come out of the pandemic with consumers having saved on the order of $2 trillion in the USA.  That's a bit of money.  Just about what govt is going to spend here this year.  All in all I'd say that the govt is getting ready to spend more than we need (should have been done last year to help the people really needing it) just as we are going to be nearly all vaccinated.   So, I'd expect it to go on a while.

@wudman said a huge pine mill would open on the border of VA/NC, would not surprise me to see some other mothballed facilities reopen but I doubt much new construction.

Household net worth increased $6.9 trillion in Q4. Real unemployment is close to 10%. This recovery will look much like the last one. K shaped. Hotel occupancy is down 26.7% from the same week in 2019. Still a lot of slack in the economy before inflation starts to appear.

[mike_belben]

With starter homes costing 400k, pickups at 90k and $16 2x6s i cant believe anyone that tells me homeowners are in less debt.  Just like i cant even listen to anyone telling me that inflation is 2 percent.  Its clear im speaking to the unquestioningly faithful.  Fake news lovers. 

[SwampDonkey]

According to other sources Q4 of 2020 in the US, the household debt was $14.6 trillion and the average debt was $145,00 per household. Mortgage debt $10 T. So there must be a lot of high rollers in there about to implode. :D  Your government isn't giving out that kind of money. :D The piper will be a calling. It don't add up to prosperity, more like Sodom and Gomorrah. ;D

[Claybraker]

According to other sources Q4 of 2020 in the US, the household debt was $14.6 trillion and the average debt was $145,00 per household. Mortgage debt $10 T. So there must be a lot of high rollers in there about to implode. :D  Your government isn't giving out that kind of money. :D The piper will be a calling. It don't add up to prosperity, more like Sodom and Gomorrah. ;D

Those numbers sound about right according to the Fed.  It's going to be very much a K shaped recovery. It's already well underway.  The Equity market has been the biggest change.
The net worth of households and nonprofits rose to $130.2 trillion during the fourth quarter of 2020. The value of directly and indirectly held corporate equities increased $4.9 trillion and the value of real estate increased $0.9 trillion

The Fed - Financial Accounts of the United States - Z.1 - Current Release

[BradMarks]

Back to lumber.  KD DF 2x4x8: $6.78 last weekend, green was $5.38.  And it is milled here, not brought in.

[Southside]

I don't care what talking head says what. Everyday folks are not sitting on buckets of cash. They have not saved, they have spent every dime that rolled their way. We see it with turf sales, jump in sales with every check that shows up. 

Did you know that you can finance a front door through "window world"? That's what folks are doing, they didn't become mizers in all of this. 

[florida]

When the government starts shutting down businesses,  telling others how they must operate and what their pay scale has to be, and tops it all by handing out free money we shouldn't be surprised that those things affect the economy. That free money has no value, it doesn't even exist except as numbers on a check. No goods or services back it up so it drags down the value of what good money we do have. Everyone has to raise prices to just stay even and some people just go belly up and become an even larger burden on taxpayers. I can't cover my nut on what I was charging last year, I'd have to close shop. So I raise my prices to my customers and away we go.

I can't buy enough Pex parts to plumb my bathroom, can't buy enough CPVC pipe and parts either and they have no idea when they will be back in stock. Framing lumber and sheet goods are through the roof driven by super high demand and too many closed lumber mills. This is not a local problem, all these items trade on the world market, and the whole world is short. In contrast, 5/4" PT decking(low demand) is hardly up at all.

None of this should come as a surprise, it's what always happens when governments manipulate markets. Eventually, in spite of government interference the market will, as it always does, fill in the gaps, prices will stabilize and inventories rise to fill the need.
In the meantime,   it won't be pretty.

[SwampDonkey]

Somebody's math reminds me of Roosevelt's lend lease to Britain during the war. :D

[Walnut Beast]

Household debt is at recent lows, people have banked a bunch of money (which is good).  This goes to show that if you cut out sports and eating out all the time and shopping to be shopping that people can actually save money.  

I like to go out to eat once in a while but am generally shocked by how many people seem to eat out 2-4 days a week.  That gets expensive real fast.  

So, we'll come out of the pandemic with consumers having saved on the order of $2 trillion in the USA.  That's a bit of money.  Just about what govt is going to spend here this year.  All in all I'd say that the govt is getting ready to spend more than we need (should have been done last year to help the people really needing it) just as we are going to be nearly all vaccinated.   So, I'd expect it to go on a while.

@wudman said a huge pine mill would open on the border of VA/NC, would not surprise me to see some other mothballed facilities reopen but I doubt much new construction.

The frosting on the cake looks really good now but wait till things heat up down the road. I think there are going to be record foreclosures. From many different analysts if been listening to is quite the opposite of the pretty picture that's been getting painted

[nativewolf]

Bloomberg news has another piece on Lumber expected shortages for near future.  Didn't read it but that sort of news is interesting.  

We are seeing high log prices in some things, yellow poplar , walnut, white oak.  Also tie logs are smoking , almost worth cutting 😂.  


Until people spend money and wages increase  inflation is not biting.  I am much Much more worried about deflation  than inflation.  In fact I would be happy if inflation would increase quite a bit more.

[Walnut Beast]

Sitting on piles of cash 💰 NOT!!  

 How about the casinos 🎰 before the pandemic that were sitting on various reserves from anywhere of 6 months to 18 months in cash that was 70 to 650 million. Now they have bailout money so they are walking the tight rope. If things go wrong, major repairs or other problems that the bank doesn't like they will pull the plug which equals chain reaction to everybody working there that was also operating off borrowed money. Can't pay = foreclosures 

[Walnut Beast]

I remember a estate planner told me in a conversation one time about various people. Many people that are living in the monster mansions and driving all the fancy cars when the pen starts to figure debt ratio to assets it's actually very shocking what they are actually worth. You can own a million dollar place but if you owe 900k what is your net worth 100k

[Andries]

Bloomberg news has another piece on Lumber expected shortages for near future. . . .
Until people spend money and wages increase, inflation is not biting. . . . 

People are spending money they don't have - that's been going on since some clever guy invented the credit card. People simply sign up for more until told that they can't.
No deep thinking goin' on, just a dare-to want-it-all attitude.
The central bankers in Canada and the US are holding interest rates down to rev up the economy, and the consumer is rising to the bait of low interest.
I know a few stud mills up here that are shut down, surrounded by millable trees and an experienced workforce.
Does anyone think this is an artificial, or contrived shortage of lumber?

[SwampDonkey]

I think they want to get paid for their lumber shipments. On rocky ground with payments means no more lumber. :D