If you’re considering a new deck or a roof replacement, you might think twice before you cut once.
It turns out that the cost of a roof is, well, through the roof.
Douglas fir prices have doubled.
Some plywood prices have nearly quadrupled.
Lumber prices are up over 200%
Last week the price per thousand board feet of lumber soared to an all-time high of $1,188, according to Random Lengths. Since the onset of the pandemic, lumber has shot up a whopping 232%.
Home builders and DIYers don’t want to hear this, but the ceiling could be higher—maybe even a lot higher. Last Monday, the May futures contract price per thousand board feet of two-by-fours jumped from $48 to $1,420. That squeeze once again triggered the circuit breakers and caused lumber trading to halt for the day. Why would lumber yards and builders pay above market rates? Severe lumber scarcity has buyers on edge. They’re buying the sky-high contracts in order to ensure they’ll actually get the lumber they need for projects already under contract.
“The market is in trouble. It could spiral out of control in the next few months,” Dustin Jalbert, senior economist at Fastmarkets RISI, said. The issue? Supply, which is already backlogged, simply can’t catch up as demand continues to grow with the start of the home building and home renovation seasons.
This supply and demand mismatch is largely a result of the pandemic. At the same time that state-mandated lock downs caused mills to halt production, bored quarantining Americans were rushing to Home Depot and Lowe’s to buy up materials for do-it-yourself projects. That caused lumber inventory to plummet. It only got worse from there: Recession-induced record-low interest rates caused a housing boom. In March, new housing starts hit their highest levels since 2006. Of course, new homes require a lot of lumber, thus exacerbating the shortage.
On the supply side, lumber production is finally rebounding: Wood production hit a 13-year high. But that can only do so much. Limited mill capacity combined with labor shortages, mean supply can’t catch up to robust demand.
Stinson Dean, CEO of Deacon Lumber, said on Monday that soaring lumber futures contracts, including for months as far away as November, signal that lumber prices will be elevated for quite some time.
For prices to correct, Jalbert says, demand will need to cool down—something that is unlikely to occur until the home building and renovation seasons are over. Simply put, exuberant lumber prices aren’t going anywhere in the next few months.
With interest rates as low as they are, it could be fairly tempting for a potential new home owner to jump in on the readily available financing for that new home construction loan only to be disappointed to see that the costs associated with most building materials have quite literally gone through the roof. Smaller home builders/contractors can put the bid in at the current price for materials and end up being turned down by the client once they experience the sticker shock related costs.
Larger builders/contractors might be willing to see their margins evaporate in the short term just to stay in the game. Knowing that these prices are totally unsustainable in the long term, they may be willing to risk the loss if it means better days being just around the corner will justify their short term red ink on the ledger books.
On yet another front, I can see the eventual potential loss of jobs in the industry as smaller builders/contractors struggle to close the gap between materials cost and profit. It seems as well that nobody seems to remember 2008-2009 when the housing market tanked. As with any bubble, it’s all going to come to a head eventually, and once again, regardless of the current low rates, home owners will once again be left holding the bag.
I see that the Fed has painted itself into another corner. Keeping interest rates insanely low does nothing for the economy, as the Fed will eventually have to raise rates thus creating another perfect storm of foreclosures as home owners suddenly realize that they are now upside down not only on their loans, but also on their hyper inflated property taxes related to those loans. They’ll be stuck having to pay huge money for a property/home that wasn’t really worth huge money to begin with.
As for me? As tempting as it might sound to run all off to the bank with my arm out and my leg up to get that “cheap” loan, I’ve opted to wait it out.
New bills in the Montana Legislature
It’s been somewhat of an odd year indeed here in Montana, what with all of the Corona Virus in’s and out’s.
A rather mixed bag of sorts to say the least. Some counties under mandates and others not, mixed messaging and confusion over some of the simplest things made for some rather delightful conversation down at the local feed store.
Was it really as bad as people say? Well, that really depends on who you talk to I guess, but here in Cascade County things pretty much moved along as one might expect. The population of Great Falls is such that caused our county health department a bit of concern (our county mask mandate only lasted for 2 weeks), but we were no where near the panic stricken hordes that were found in other counties around the state. Missoula County for instance, even today, plans to keep it’s mask mandates into perpetuity, and in Lewis and Clark County for instance, we’ve got county health officials, to a point, actually threatening and verbally abusing shoppers at grocery stores.
According to police reports, the second-highest-ranking Lewis & Clark County health official, Eric Merchant, was removed by police from a local grocery store for making physical threats and verbally assaulting customers for not wearing masks. After his expulsion, Merchant was given an indefinite trespass order from the establishment. – Montana Daily Gazette
As a result of all of the asshattery that’s gone on over the past year, we now have the Montana State Legislature stepping in to try to cool the heels of our dear mask Nazi extremist friends.
Recently, according to KTVQ in Billings, The Montana House has endorsed a bill that would let the public ask for an election to change local health boards’ actions.
Oh, and there’s more — Besides just Senate Bill 108, there’s also other like minded legislation coming, like House Bill 121, and House Bill 257 for instance.
Many of my dear liberal friends seem to be all up in arms over these new rounds of legislation, citing Republican indifference to the health of our state citizens.
We here in Montana are a fairly independent minded bunch. Short of having un-elected officials screaming at shoppers, we manage to move through our days with relative ease.
No — We don’t have hundreds of off-cocked radical liberals roaming our city streets in Montana, but we do have a few that couldn’t seem to keep their ever loving mouths shut because they might have control issues. We now have these house bills advancing in Helena as a result. Blame the Republicans? Sure, why not. Our liberal friends might do well to understand however, that for every action, there will be an equal and opposite reaction.
All of this legislation could have been prevented if people could have just minded their muse, and with county health departments acting responsibly, without any sort of political bent.
A reminder … it is possible to be both fully aware that covid is real and deadly while still believing that many of our approaches to handling it have been absurd, ineffective, disproportionate, and immoral.