Lumber takes 30% plunge

Posted by Rumin Mann
July 2nd, 2010

What goes up, comes down, much to everyone’s disappointment, but to no one’s surprise.  Our lumber price is in a free fall, and mills have cut back temporarily shut down. See five-year-span price analysis of lumber, logs, housing starts, permits, unsold home inventory, and mortgage rates below.

Interpreting the trends.
Like a rocket launch, our lumber product indicator went up quickly and down even more quickly, without any orbit at higher levels.  This dramatic fall in lumber and other wood product prices was widely predicted, but very disappointing.  Unfortunately inventories are now full, and housing starts, which are a driving statistic of demand, are weakening.  For the last 5 weeks, according to Random Lengths, lumber inventory buildup has exceeded orders.

From February to April, lumber went up from 275 to 333, but by June, it is back down to $235, a drop of $100 or 33% in just 2 months!!!  With this freefall of prices, it should come as no surprise that  many mills are cutting down the supply by either shutting down sawmill capacity temporarily or cutting back hours significantly.

It is not helping that housing starts are down about 10% while building permists are at an even lower level than starts.  This is not a good trend.

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