Timber futures down 62% in ‘Great Reset’ – Here’s when DIYers can expect the best deals

Lumber prices have been on a wild ride over the past couple of years. such as Chance During the epidemic outlined earlier, two giant bubbles formed in the normally under-the-radar lumber industry, and both eventually popped.

Since March, with interest rates rising, the housing market cooling, and new home construction slowing, demand for lumber has fallen — and so have prices.

Lumber futures fell to just under $500 per thousand board feet on Friday, or 62 percent below the January high of $1,329.

As pandemic restrictions ease and Americans return to eating out and traveling, the continued shift in consumer spending from goods to services is dampening wood demand, said Dustin Jalbert, senior economist at market research firm FastMarket RISI. Chance.

For this and other reasons, Fastmarkets RISI predicts that US softwood lumber consumption will decline 1.4% year over year in 2022. But Jalbert said in a July research report that this was still a “modest” drop by historical standards, and it is. Too soon to call a recession in the lumber market.

Experts said. Chance As we near the end of the swinging epidemic, prices for wood will rise and DIYers should be on the lookout for great deals over the next few months.

“The Great Reset”

Kyle Little, chief operating officer of building materials wholesaler Sherwood Lumber, described the lumber dynamics over the past two years as a “cyclical bull wave” driven by “surprising supply chain and demand events.”

The industry has faced perfect supply chain complications due to Covid, problems finding enough labour, beetle infestations and wildfires in British Columbia and more during the pandemic – all coupled with a simultaneous increase in housing demand.

But now Little says it’s taking on a new cycle.

“In this new cycle, we’re in what I call the ‘Great Reset,'” he said.

Little added that he believes lumber prices will be lower than the past three or four years, but will not return to 20-year historical norms of $200 to $400 per thousand board feet.

“I don’t think it’s doom and gloom for the timber or building products business because generally the demand for accommodation is very high for the next five years or so,” he said. “Millennials are still in the early stages of family formation. And you can’t ignore demographics.

Fast Markets RISK Jalbert also spoke. Chance Soon the prices will be lower.

“I think things are starting to calm down a little bit here,” he said, adding that he believes new home sales and home purchase applications will begin to recover from the recent surge in mortgage rates, which will help boost demand for lumber.

“The other thing on the supply side is that high-cost mills in Canada, particularly in British Columbia, are cutting back on production to balance with the drop in demand,” Jalbert said.

If mills cut production dramatically, it would help set a floor on lumber prices, Jalbert said.

However, Ashley Bockholt, founder of MaterialsXchange, a digital marketplace for buying and selling lumber, says it’s difficult to predict when sawmills will cut production due to falling lumber prices, as some operators are willing to stay open even when they are damaged or destroyed. Loss of money.

“Things can stay in motion longer than people appreciate,” he said. Chance. “I’ve learned over the years that it’s a fool’s errand to guess when someone will close or open. It’s just hard to know.”

With or without closure, Bockholt agrees with Little and Jalbert regarding future timber prices.

“I think the reality is that the crazy volatility of the last couple of years in lumber is winding down and we’re getting into a more normal market,” he said. “From what I saw today, I don’t think we’ll see a crash; I think prices will moderate.

When to expect the best deals

All professionals Chance As we’ve discussed with the deal, much of this is due to the decline in wholesale lumber prices, and while it may take a few months for those declines to affect retail prices, there’s really no point in waiting for better deals if you’re looking to build that new. Decorate or renovate your kitchen.

“We believe, right now, that lumber is in the lowest quartile of what the new region can trade,” Little said. “I think it’s actually less than that. So, if you’re looking for long-term price action, we’re bullish on the current price structure, knowing we’re coming off a 70-plus percent decline. I mean, this is a huge sale.

MaterialsXchange’s Boeckholt agrees, and says DIYers should start looking for deals now.

“If someone wants to build something now, if I’m going to tell them when to buy, the numbers are fixed and trying to pick the bottom of the market is a waste of time,” he said. . I’m not waiting for the price to drop like it did six months ago.

Jalbert from Fastmarkets RISI said some buyers may find it worthwhile to wait a month or more for retail lumber prices to catch up with lower wholesale prices, but he also offered a caveat.

“I think it depends on everybody’s situation,” Jalbert said. “But I think the biggest drops are behind us for lumber and construction and things like that. So I’d say, if you really want to be patient, you can save a little more if you wait. But I’d say if you’re ready to go, I’m not sure there’s that much downside left here to help you save.”

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