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Discussion: (14 comments)

  1. Jon Murphy

    The Materials & Components for Construction Producer Price Index also rose 2.2% over the past year.

  2. morganovich

    i’m not sure this lumber story is that simple.

    my understanding is that there has been a dramatic credit crunch at the distributor level that has dropped supplies a great deal.

    as a result, distributors are using futures instead of holding inventory which drives up the CME price and keeps supplies tight.

    http://www.reuters.com/article/2012/03/14/usa-lumber-idUSL2E8EE5SQ20120314

    i’m also wondering about overall production levels here.

    are we so sure this is a predominantly demand driven issue?

    1. “i’m not sure this lumber story is that simple.”

      It’s nowhere near that simple.

      We entered the fraud zone back in the 1920s (I think), when they declared that a 2 x 4 didn’t actually have to have a finished size of 2 inches by 4 inches.

      More recently, the quality of lumber has been falling an falling and falling some more. It’s more and more difficult to get big slabs of clear lumber. Most of it is new planted pine, not really mature nor properly cured. There are more and more knots and warping in the framing and finish lumber of smaller dimensions, and they’ve been pushing that MDF and HDF and stranded glued-together garbage (not to mention the killer formaldehyde fumes… and the sulfur compounds from the Red Chinese wall-board).

      When you look at price variations you have to at least make a gesture at trying to hold quality constant.

      When they came up with insulated form concrete construction systems I naively thought it would bring high quality at lower prices because the styrofoam forms come in big pieces, reducing labor (as compared with both stick-built and brick-masonry, but, of course, bricks are rarely structural, anymore, but mere facade). But it turns out, IFC construction is considerably more expensive (still, there are other advantages and disadvantages to consider).

      Grump grump grump.

  3. Also, Sandy hit the industry at what is typically a low-level inventory stage heading into winter.

    1. Jon Murphy

      Sandy wouldn’t have had that large an impact in the prices. There may be some downward pressure in the coming weeks, but it doesn’t change the overall trend.

      1. I repsectfully disagree.

        1. Moe, unless Sandy hit in 2009, I don’t think it had much of an impact. There’s been a pretty steady trajectory since 2009. Whether the increase in demand or a supply constraint, I’ll leave to others to sort out. But, we can pretty much rule out Sandy as the cause of the jump in prices since 2009.

          1. morganovich

            i think moe was referring only to the recent jump in price.

            it seems reasonable to me to expect that lumber prices might spike in anticipation of a demand spike from rebuilding damage done by the storm.

            how much of a spike and how long it will last are certainly matters that could be debated, and i have no really good view on that, but the basic notion that the repair effort will increase short term demand and cause a price rise seems like a pretty reasonable assessment.

          2. You are correct Methinks and Jon…I was speaking to the most recent uptick which caught most lumber providers flatfooted. I wasn’t look at the overall trend.

          3. Jon Murphy

            Ok, than that I agree with.

  4. Citizen B.

    Lumber futures are spiking up this am @ 7:45 PST <A HREF=http://futures.tradingcharts.com/intraday/LS/13 (candlestick format is easier to read, imo).

  5. morganovich

    housing starts were over 2 million in 2005.

    they sit at about 875 today.

    that would seem to cast some doubt on calling this price move predominantly demand driven.

    it seem more like a supply contraction/simple price inflation.

  6. That’s good for the Canadians. U.S. people aren’t allowed to cut trees.

  7. how much of this “homebuilding” is multi-family (apartments), to house all the people who have lost their homes?

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