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Soaring lumber prices add to the cost of a new home

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Re: Soaring lumber prices add to the cost of a new home

#31

Post by totalZero »

throwaway0a5e wrote: post #9
colinchartier wrote: post #5

> Lumber tariffs had prices already rising a year ago, but then when the pandemic hit, production shut down. The expectation was that housing demand would dry up for a long time. But instead, after a brief pause, it came roaring back. How can this be the case when lumber prices are surging in Canada as well? You'd expect that if the price was in response to tariffs then the origin country would be flooded with supply…

The big bottleneck is mill capacity (as evidenced by the fact that timber prices have not increased much). Unexpected high demand is driving most of the rest of it. Both of those affect Canada as well. Tariffs are only a small part of the overall cost increase.

If this is the case, then lumber should be backwardated right now.

checks the futures market

And indeed it is. May trades 40% above Nov on CME.

So if you want to buy a rural house, you can just....wait until a couple of years after the pandemic?

I don't know why you would rush to build a house right now, unless you want to live in technocrat-favored places like Austin and Denver that are seeing demand creation due to permanent WFH among Big Tech companies.

Re: Soaring lumber prices add to the cost of a new home

#32

Post by throwaway0a5e »

hippich wrote: post #12
epicureanideal wrote: post #2

So about 0.3% of the price of an SF Bay Area home? At least in this area, the price has a lot more to do with NIMBYism than the cost of materials.

Problem is - lumber prices are about the same across the country. In SF Bay area and some middle of nowhere, where such lumber increase makes a significant difference.

Lumber prices are not the same nation wide because lumber is not thaaaaat expensive to manufacture per volume/weight so shipping costs to get it from mill the mill to the end user are a larger and larger portion of cost the farther from the mills you get.

Re: Soaring lumber prices add to the cost of a new home

#33

Post by almost_usual »

throwaway5752 wrote: post #13

I wouldn't buy a house now if I could help it. It only seems reasonable because of extremely low rates. That is also the same thing driving equity valuations in our field to historically unusual levels. This is partially driven by market and partially driven by monetary policy, and it really can't go much lower than it is. Rate increases have a large increase on the present value of a mortgage of stock.

I didn’t bet on this, have excess funds and pulled the trigger last month and closed on a home where I want to be. I don’t think I’d care if the price dropped 50% tomorrow, I’m where I want to be in the long run and my rate is a near record low.

Re: Soaring lumber prices add to the cost of a new home

#34

Post by throwaway1777 »

aazaa wrote: post #22

> Some builders have said they are slowing production in the face of exorbitant costs, but single-family housing starts were up 41% in March year over year, according to the U.S. Census. Builders are clearly trying to ramp up production as fast as they can to meet soaring demand. For the next several months we'll be in a period of base effects . That means that year over year comparisons are going to look alarming. T…

You’re not wrong about housing starts, but as far as the lumber prices goes it’s not a base effect. The price was already increasing pre-covid and covid shutdowns accelerated the trend.

Re: Soaring lumber prices add to the cost of a new home

#35

Post by throwawayboise »

skit wrote: post #8

What's even crazier is that the builders are identifying that even with the increased price for lumber, demand is still there—people are willing to eat the cost. I don't imagine builders will be decreasing their prices after there being plenty of lumber supply.

Unless they are colluding that's not how a free market works. If supply is truly plentiful, someone will be willing cut prices to gain sales. Others will then have to follow or watch their customers disappear.

Re: Soaring lumber prices add to the cost of a new home

#36

Post by throwaway0a5e »

ericmay wrote: post #21
nradov wrote: post #16

Earlier quoted context omitted.

Median incomes are irrelevant to housing developers. All that they care about is whether there are enough customers to buy their products. The developers typically don't lend to customers so the only risk is that demand might collapse in the middle of a project. A lot of small developers went bankrupt during the last recession because they had borrowed to build new projects and then couldn't sell the completed homes.…

> The federal government wouldn't really be able to prevent REITs from buying up homes. Why wouldn't it? If this was bad enough the government could just pass limitations on it. Hell, the government could probably ban REITs overnight if that was wildly popular.

Even if the industry is unpopular there's not that much appetite for legislatively killing it at the drop of a hat because everyone knows that's not a good precedent to set.

More realistic would be substantially increased taxes on non-primary residences.

Re: Soaring lumber prices add to the cost of a new home

#37

Post by pbronez »

ericmay wrote: post #21
nradov wrote: post #16

Earlier quoted context omitted.

Median incomes are irrelevant to housing developers. All that they care about is whether there are enough customers to buy their products. The developers typically don't lend to customers so the only risk is that demand might collapse in the middle of a project. A lot of small developers went bankrupt during the last recession because they had borrowed to build new projects and then couldn't sell the completed homes.…

> The federal government wouldn't really be able to prevent REITs from buying up homes. Why wouldn't it? If this was bad enough the government could just pass limitations on it. Hell, the government could probably ban REITs overnight if that was wildly popular.

If you want to support individual home ownership against well-capitalized REITs, I think you basically need local governments to impose some kind of vacancy tax and/or an non-owner-occupancy tax. Otherwise individuals will never have the financial firepower to keep up.

Re: Soaring lumber prices add to the cost of a new home

#38

Post by forrestthewoods »

andrewmcwatters wrote: post #4

I don't know what the risk calculus is for these home developers, but I do know that in particular areas of the US, you just straight up cannot afford a home anymore on median income (or even the top 20%ers looking for fair pricing!). I anticipate that mortgages will continue to push past 30 years into a strange 45-year+ territory, and we'll begin to see Japan-like multi-generational mortgages. Actually, in reality t…

> but I do know that in particular areas of the US, you just straight up cannot afford a home anymore on median income

Correct. The national median income is insufficient to purchase a home in the most expensive cities in the country. That seems reasonable?

The national median household income is about $65,000. That’s enough to afford a mortgage of somewhere in the $300,000 to $350,000 range.

Is that enough for San Francisco? Absolutely not. But that will buy you a nice house in the vast majority of the country.

California has garbage housing policies. San Francisco is even worse. You can buy a lovely place in Dallas, Kansas City, Atlanta, etc on national median income.

Re: Soaring lumber prices add to the cost of a new home

#39

Post by ixacto »

epicureanideal wrote: post #2

So about 0.3% of the price of an SF Bay Area home? At least in this area, the price has a lot more to do with NIMBYism than the cost of materials.

This is the real problem IMO. We need more dense condos like Chicago, where the median condo price is 268k versus other large cities where it is almost double that.

This is just people being taking advantage of their housing...investment/tax shelter/savings plan that is bidding the price up.

Look at something like this zero red flags that I can see for $219k that is much cheaper than in most other large cities, housing doesn't have to be this expensive. https://www.redfin.com/IL/Chicago/1706-W-Huron-St-60622/unit...

Re: Soaring lumber prices add to the cost of a new home

#40

Post by tryptophan »

andrewmcwatters wrote: post #19
Workaccount2 wrote: post #11

Earlier quoted context omitted.

The financial/economic forest is way overgrown and no one wants to be the one to set it on fire.

I agree. Politicians have weak incentive to push back I assume? If you do, you put average people at REITs out of work. This isn't a terrible thing if you ask me, because not much of it is real estate specific. REIT HR people can find work at other companies, developers and salespeople, too. But it's not a good look, I suppose? Real estate is a real problem that no one seems to want to touch. "The rent is too d*mn hi…

REITs are not the problem. Land speculation is the problem. Worst part is that the gov promotes this, and voters eat that shit up as well("Your mortgage is an investment").

https://en.wikipedia.org/wiki/Land_value_tax is the solution.

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