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Lumber prices are so high that this ordinarily sleepy industry has captured headlines around the world. The generic lumber spot price reached $1,420.50 at time of writing — more than triple the figure of December 2019. The National Association of Home Builders estimates that this has added $24,000 to the average cost of new home construction relative to this time last year.
It's an unfortunate situation for builders, buyers of newly constructed homes, or anyone else who uses lumber. But it's also an unavoidable long-term consequence of some horrific policy mistakes that were made after the Great Recession. The only way to deal with this problem sensibly is to keep running the economy hot so that new supply can come online to catch up with demand.
It's an unfortunate situation for builders, buyers of newly constructed homes, or anyone else who uses lumber. But it's also an unavoidable long-term consequence of some horrific policy mistakes that were made after the Great Recession. The only way to deal with this problem sensibly is to keep running the economy hot so that new supply can come online to catch up with demand.
lumber-shockingly-expensive-thanks-obama
Posted from theweek.com
Construction
Money
Policy
Edited >1 y ago
Posted >1 y ago
Responses: 2
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Yup, blame Obama for everything while ignoring the obvious! https://finance.yahoo.com/news/trump-apos-timber-tariff-big-023247659.html
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Lt Col Charlie Brown
The Week is liberal and an Obama fan (usually) so from the article...
Let's review some history. During the 2008 financial crisis, the lumber industry was among the worst-hit. The disaster was centered in the housing market, and the immediate effect was a collapse in home construction and residential investment (the primary consumers of wood, along with paper producers). Many lumber companies went belly-up, and those that remained were forced to slash their costs to the bone.
The result of these choices was a prolonged depression in housing construction. After 2008, residential investment as a share of the economy plunged to the lowest level recorded since 1947, and recovered with grinding slowness — only returning to the level of the previous record low in mid-2014. So not only did the lumber industry take a massive hit, it did not experience any kind of rebound in demand for over a decade.
As Joe Weisenthal, Tracy Alloway, and Stinson Dean explain on the Odd Lots podcast, all this made the lumber industry deeply pessimistic and conservative. A whole decade passed where wood sales were chronically weak, and anyone who tried to boost production risked bankrupting themselves (particularly because it is very expensive to grow, harvest, transport, and store wood). Firms therefore ran tight operations, with little investment in tree plantations, sawmills, or spare inventory, and were always terrified of the next crisis — thus they shed most of their inventory during the pandemic, for fear of another 2008-style collapse.
Let's review some history. During the 2008 financial crisis, the lumber industry was among the worst-hit. The disaster was centered in the housing market, and the immediate effect was a collapse in home construction and residential investment (the primary consumers of wood, along with paper producers). Many lumber companies went belly-up, and those that remained were forced to slash their costs to the bone.
The result of these choices was a prolonged depression in housing construction. After 2008, residential investment as a share of the economy plunged to the lowest level recorded since 1947, and recovered with grinding slowness — only returning to the level of the previous record low in mid-2014. So not only did the lumber industry take a massive hit, it did not experience any kind of rebound in demand for over a decade.
As Joe Weisenthal, Tracy Alloway, and Stinson Dean explain on the Odd Lots podcast, all this made the lumber industry deeply pessimistic and conservative. A whole decade passed where wood sales were chronically weak, and anyone who tried to boost production risked bankrupting themselves (particularly because it is very expensive to grow, harvest, transport, and store wood). Firms therefore ran tight operations, with little investment in tree plantations, sawmills, or spare inventory, and were always terrified of the next crisis — thus they shed most of their inventory during the pandemic, for fear of another 2008-style collapse.
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Lt Col John (Jack) Christensen
Lt Col Charlie Brown Yes, but Obama inherited the 2008 financial crisis, not create it. Actually he implemented programs that eased the crisis as the article implies.
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PVT Mark Zehner
SGT Stephen Krzyzczuk Sr exactly and if you add in an APR of 1.87% I'm staying where I'm at for a long time!
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