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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

#41

Post by toomuchtodo »

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…

A fun question we kick around and model in a financial forum I participate in is, “How much insolvency occurs economy wide for every 100 basis points (1%) the Fed increases their interest rate target?”

If interest rates go up, real estate and equities prices come down, and US gov borrowing costs increase. Borrowing costs go up for zombie firms and they fail. How much appetite is there for any of that? The same as long term central back interest rate policy: zero.

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

#42

Post by xiphias2 »

omgwtfbyobbq wrote: post #27

From what I've heard, this is mostly a function of... 1) Lumber mills shutting down because of weak demand and tariffs. https://www.woodworkingnetwork.com/news/woodworking-industry... 2) Curtailment of remaining production because of coronavirus https://www.woodworkingnetwork.com/news/canadian-news/corona... 3) The housing market going a little nutty https://www.vox.com/22264268/covid-19-housing-insecurity-hou... 4)…

So basically people in the US voted for higher prices, so that they can keep their job that can't compete on international markets, and they got what they voted for.

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

#43

Post by pbronez »

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.

I recently met with a builder who said exactly this: prices are up quite a bit, but he expects they'll be sticky and stay high.

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

#44

Post by garettmd »

adrr wrote: post #30

Has anyone looked at the cost of food or gas lately? Interest rates need to go up. It is beyond stupid that I was able to refinance my house at 1.75% on 15 year loan in December. My previous loan was 4% on a 30 which already was extremely low. It’s giving people free money who don’t need it. Side effect is the inflation that punishes the poor even more.

This. I've seen several sectors where prices are going up, and everyone always points to narrow causes particular to that sector for prices going up. But everyone seems to ignore the fact that when you add trillions of dollars to the economy one of the most understood results is that it increases inflation.

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

#45

Post by jbay808 »

forrestthewoods wrote: post #38
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 F…

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

It's not clear if the GP was referring to national median income. My interpretation was that they may have been referring to local median income. Is the median family income of SF ($136k, I think) enough to buy a home there?

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

#47

Post by aschearer »

paulpauper wrote: post #17
BitwiseFool wrote: post #6

The universe is determined to keep as many millennials from buying homes as it can.

millennial home ownership rates is only slightly below boomers when matched for age

Not according to this article: https://www.washingtonpost.com/business/2020/01/20/millennia...

"When baby boomers hit a median age of 35 in 1990, they owned nearly one-third of American real estate by value. In 2019, the millennial generation, with a median age of 31, owned just 4 percent... that gap will probably narrow by the time they see 35. But they’re not likely to reach 30 percent of the housing market — or even the 20 percent attained by the smaller Generation X at the same point in their lives."

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

#49

Post by Leherenn »

throwawayboise wrote: post #35
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.

Doesn't that assume that you can scale relatively quickly? Otherwise the effect can stay marginal.

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

#50

Post by ortusdux »

omgwtfbyobbq wrote: post #27

From what I've heard, this is mostly a function of... 1) Lumber mills shutting down because of weak demand and tariffs. https://www.woodworkingnetwork.com/news/woodworking-industry... 2) Curtailment of remaining production because of coronavirus https://www.woodworkingnetwork.com/news/canadian-news/corona... 3) The housing market going a little nutty https://www.vox.com/22264268/covid-19-housing-insecurity-hou... 4)…

Also:

- WFH people fleeing high COL cities, buying fixer-uppers, and paying whatever to renovate

- Rolling covid shut-downs of companies that make wood products like OSB glue or treated wood chemicals

- Freight costs

- Trailing effects from a bad fire season and the Texas ice storm repairs

- Tariff repercussions

- Russia is planning to stop exporting raw logs next year. They are about 12% of the worlds supply.

- Speculators profiting off the volatility

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