#lumber #homes #prices
$DIA $SPY $QQQ $RUTX $WY $HD $VXX
The North American lumber industry is having its wildest yr in memory, and that happened before the wildfires.
Weyerhaeuser Co.(NYSE:WY), North America’s biggest wood producer, said Friday that the blazes that have blanketed much of the Western US sky in an apocalyptic orange had reached its timber operations in Oregon. All employees are safe, the company said, and it was too early to measure the potential effects on its business.
That is the 2nd natural disaster to rock the lumber industry in Y 2020. In March, producers idled sawmills during the coronavirus lockdown, a month later, pent-up demand exploded.
Homebuilders broke ground on a surprising number of new houses, and do-it-yourselfers, fortified by government stimulus checks, took on home repairs and remodeling jobs they were able to tackle while under quarantine.
In the wake of that volatility, futures have climbed 50% YTD, and even after falling from a record high last month, prices are still on pace for the largest gainer since Y 1993.
Now huge wildfires look like they are about to have an impact on the industry.
Logging bans, closed railroad lines and shuttered mills in the Pacific Northwest have added tension to an extremely tight supply chain. In more normal times, some customers would pad their inventories on concerns that commercial timberlands could go up in smoke. But that’s impossible now due to a supply shortage.
This is an unprecedented market, there’s no flood of supply and no let up in demand.
I see lumber prices dipping in Q-4, but come back strong in Y 2021, boosted by another wave of demand, delayed in part by the current shortage.
Last month, futures reached an all-time high of 830.90 per 1,000 board feet. The current price at 640 is 68% higher than the average over the last 5 yrs.
With unpresented supply and demand, volatility has spiked. Consider Weyerhaeuser’s performance. Shares lost more than 50% their value in March, only to make it all back by the end of July.
Lumber’s price swings have rippled across the country. Boosted by higher material costs, the average new single-family home sells for $16,148 more in August than it did in mid-April, according to the National Association of Home Builders. The average price of a new multifamily home has increased by $6,107 over the same frame.
Housing the bright spot, for the overall economy in recent months.
:Lumber futures are a good indicator, especially for the rising housing market on one side but worrisome as an inflation indicator on the other. The consumer result is that this means construction costs are going up and thus, the price for new housing will go up, fueling inflation fears which is everyone’s concerns, especially in a recovering economy and competitive exporting, when practicable.
Further distressing is the fact that our supply of cutting trees has gone down. California fires are also very concerning for there seems to be a lack of good forestry procedures on the part of the California State Government. They seem to want to blame the President and Congress, yet the problem is for them to cure using better planting practices, clearance and tree spacing,” says economist Bruce WD Barren, Chairman of The EMCO/ Hanover Group.
Demand is strong.
In July, US new-home sales jumped to the highest in nearly 14 yrs, buoyed by a reported urban exodus to the suburbs and historically low mortgage-interest rates. At Home Depot Inc.(NYSE:HD), a supplier to weekend carpenters, lumber was the best-performing department in Q-2, according to HD’s EVP of Merchandising.
A senior analyst at BMO Capital Markets in New York, said he has been involved with the lumber market for 30 yrs and has never seen anything like what is happening in Y 2020.
Monday, the major US stock market indexes finished at: DJIA +327.69 at 27983.33, NAS Comp +203.11 at 11056.66, S&P 500 +42.57 at 3383.54
Volume: trade on the NYSE came in at 860-M/shares exchanged
HeffX-LTN’s overall technical analysis of the major stocks markets is Bullish with a Very Bullish bias in here.
- NAS Comp +23.2% YTD
- S&P 500 +4.7% YTD
- DJIA -1.9% YTD
- Russell 2000 -7.9% YTD
Looking Ahead: Investors will receive Industrial Production and Capacity Utilization for August, the Empire State Manufacturing Survey for September, and Import and Export Prices for August Tuesday.
Have a healthy day, Keep the Faith!
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