After a period of low volatility late last summer, most lumber prices gained momentum to the upside.
Demand and supply imbalances renewed fears of increased price risk heading into year-end.
ECONOMIC FACTORS
The September housing market report added proof that persistent problems caused by labor and building material shortages were taking a toll.
Housing starts fell 1.6 percent to 1.56 million starts and permits fell 7.7 percent. Furthermore, builder concerns about housing price affordability and expectations for higher inflation were reported.
Central bankers were expected to raise interest rates sometime next year, amplifying affordability concerns.
LUMBER
Inadequate lumber supplies in the distribution system pushed up prices of SPF and SYP lumber. Supply chain issues covered the gamut: weather-related log inventories, COVID-related labor issues, freight logistics issues, and mill production curtailments.
SYP 2 by 4 #2 prices increased by about 23 percent over the previous three weeks. Domestic Western SPF 2 by 4 #2 and better prices increased 17 percent, while the same item in Eastern SPF rose about 10 percent in the period.
Euro Premium spruce dimension grades elevated with the move up in Domestic premium #2 prices. Euro Premium and Domestic Premium stud prices gained ground.
STRATEGIES
Although supply shortages may persist near term, the housing economy looks resilient. Housing demand should remain strong for the next three years, as almost 5 million millennials enter their prime home-buying years.
Will there be sufficient new lumber production coming on board next year to meet the increased demand? Recent price movements suggested we may be in for continued volatility.
We are monitoring the situation closely and will report back to you. If you have any questions about the market or your strategy you can always reach me at my contact information below.
