我've heard two sides to this. One side says its going to be a permanent problem due to poor fiscal policy and a very bad supply/demand issue. The other side says the lumber prices would fall by next year and mills that were shut down are back to operational capacity.
May 15, 2021
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Comments (10)
Great article a couple months back about how lumber prices are through the roof, but tree growers are going BK. It is unlikely that housing demand will stay incredibly elevated. New mills are coming online and trees (the inputs) are still cheap. High lumber prices likely won't be permanent unless trees get expensive as well. Also, I think that if there was/is an error, the error was/is monetary policy rather than fiscal policy.
https://www.wsj.com/articles/lumber-prices-are-soaring-tree-growers-miserable-11614177282
They will come down and are starting to already. 6-month futures are around $1000/board foot when prices are presently at like $1450.
Would you guys option some of these and execute if prices stay consistent with where they are now? Seems like a decent hedge... maybe I am naive to the whole options process but it seems like it could hedge your costs if you are planning on purchasing a decent amount of lumber in 6 months in a project
No. Unfortunately, there is not a lumber derivative product for which the correlation between the futures price and regular material price on a bid job is strong enough. I'm not really sure about the mechanics of why that is, but we've dug through it with Chatham and other derivatives traders and concluded it didn't make sense.
For lumber and other materials, our GC's are expecting relief from the supply chain disruptions caused by COVID shutdowns, Texas winter storms, and Suez blockage by EOY or early-2022. That doesn't mean pre-COVID prices are coming back, but we're hopeful we can at least budget appropriately and lock-in unit costs for more than a week. The most concrete supporting data for this stance has been -- "it just can't continue to rise at this pace" -- so take it for what its worth and keep carrying your escalation contingencies.
我don't know much but it is difficult to scale lumber. Demand isn't likely changing too much given WFH and record stock market prices. Too much money chasing after too few resources = inflation. Don't think it's going away.
Lumber.
1. Fed policy distorting both in the underlying and housing boom.
2. Biden's idiocy in RAISING tariffs on Canadian imports
3. Underlying issues with freight availability. Not enough truckers.
4.在期货空头轧平。动量的买家
5. 323% increase in spot lumber. Retail passing it all through
6. Bubble, bubble, toil and trouble.
1 through 3 are systemic policy issues that the drooling class in DC could not fix with a map and a flashlight which may bring on:
7. Hyper inflation orstagflation.
8. Further destruction of the middle class as home prices go asymptotic.
Namaste.
D.O.U.G.
What's the latest on this? It looks like lumber futures are now under $900 and have steadily gone down since this discussion started a month ago. Those of you at development shops, how are you all responding as you buy supply?
We have a project that we're signing the GMP for now and the allowance is ~$750 per 1,000 board foot (lumber will get purchased around November). We expect we'll have to pay more than that, probably somewhere between $800-$1,000.
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