A few months ago, we reported that the price of wood had reached an all-time high, which adds mind 1,000 to the cost of the house.
But after a year of high prices and scarcity, the timber market is finally coming back to earth. Prices have dropped 5% since May, now totaling ০০ 60,000 per thousand board feet.
While pre-epidemic level costs still nearly double, timber production is ultimately meeting demand.
When will the price reduction reach the consumer?
The timber market operates on a backward schedule. Prices have started to fall towards production, but consumers will not feel the immediate impact of lower price points until mills sell their old, high-priced boards.
This means that builders will still face higher costs when starting projects, extending the deadline for all new construction homes, which is desperately needed to address the extreme shortage of property in the market.
The housing crisis is nothing new. A report by the National Association of Realtors (NAR) in June found that the “under-building gap” had widened from about 5.5 to 6.8 million units since 2001.
“There is a strong desire to own a home across this country, but a lack of supply is hindering many Americans from achieving that dream,” said Lawrence Eun, chief economist at NAR. “From the results of this report and the conditions we have seen in the market over the last few years, it is clear that we need to do something dramatic to close this gap.”
The nature of the timber market over the past year has not made it any better. However, a landmark sign in the inventory crisis is that consumer demand has begun to decline – at least for now. The Census Bureau reported that home sales per month in June fell 6.6% from May and 19.4% from June 2020.
Building applications also fell in June, despite wood costs starting to fall.
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But will prices continue to fall?
It is assumed that the current timber prices do not reflect the actual market demand. Robert Minter, a strategist at Aberdeen Standard Investment, told Markets Insider last week that the wood looks a bit cheaper at the moment.
This comes as prices rose above 600 60,000 in early August. In July the board posted figures of about 5 550 per thousand feet.
Minter says “demand still can’t hurt”, noting that “people are moving from where they want to work to where they want to go. People who want to move cheaply from the city center and nearby suburbs are no longer people.” Not moved.
Labor shortages and the possibility of resuming previous restrictions on the Covid-1 Del Delta alternative economy and assuming that the labor market is still not out of the wood are not safe.
The National Association of Home Builders (NAHB) shares similar concerns. In a press release last month, the NAHB noted that Samil output is lagging behind, and if it does not meet supply to meet demand, we may find ourselves in the same dilemma as last November. At the time, timber market prices were declining, only to re-shoot to record heights.
Construction costs are not stopping at wood
Although most attention has gone to wood structures, many have forgotten to examine other pieces of construction, some of which are still at record highs in cost.
For example, the price of Oriented-Strand Board (OSB) has increased by 510% since January 2020 without any signs of calm. Surprisingly, OSB did not pay attention, considering that it was responsible for nearly two-thirds of wood panel wall and roof shearing in 2019.
This is not the end. Copper prices are still close to record-high prices, as were the cost of electrical and wiring projects when wood was at its peak. Also, labor costs are rising in an economy desperate for workers. Associated General contractors in the U.S. reported earlier this year that construction wages have risen about 3.2% since 2020, a little over $ 30 an hour.
With all these mounting costs, the new construction approach is hard to predict. However, as long as some costs are getting easier, this is welcome news for most.
For real estate investors, getting the most push for Buck is an essential element of success. Unfortunately, in an economy where everything is becoming more expensive, it becomes much harder to find a deal.
It is important that we continue to focus on the timber market, as this will continue to paint a picture of the impact of Covid-1 has on our economy and the local market.