Lumber Prices are Rising! Mark Sprague’s Texas Market Update

Texas Market Update

By Mark Sprague, Independence Title State Director of Information Capital

The House / Apartment You Look at Today Will Be Gone Tomorrow!
And it will certainly be more expensive. Not only is there not enough resale inventory, rates are increasing and the cost of building is up dramatically.

Lumber prices have risen by roughly 22% year-to-date as a result of newly imposed tariffs and demand. And that’s just lumber. All materials and labor or more expensive and forecasts show a 15 to 30% increase over the next 12 months.  This leads to higher housing prices through increased homebuilder costs.

Lumber prices are the highest they’ve ever been in the United States—let that sink in for a moment. Lumber futures contracts for 1,000 board feet of lumber are trading at $513. For perspective, according to Wood Markets, in the 1980s it was rare for average monthly prices to exceed $200 (it only happened in 14 months that decade); in the 1990s, U.S. prices managed to crack $400 for 14 months that decade; in the 2000s, the housing crisis put downward pressure on lumber prices, which only broke $400 8 months that decade, and dropped under $200 for 11 months.

We’ve told you before: If you’re betting against the U.S. economy without taking note of the strengthening in the US housing market  (which nationally, regionally and locally are not near pre-recession numbers), you’re asking for trouble. Evidence: Lumber values today and projected 12 months out. This week they hit a six-year high.

Lumber graphic

Source: Calculated Risk

A lot of this is good, old-fashioned supply and demand. U.S. home building is ramping up with Texas leading the way. Russian lumber output is weak. China is gobbling up a hefty chunk of U.S. wood. And Canadian lumber is dramatically more expensive.The cost of money is going up (federal reserve rate are projected to increase 1/2% this year), so yes, buying will be more expensive.  For every 1% increase in interest rates, you lose 12% buying power.

And don’t forget the continued increase in local regulation, driving costs up and causing most metro markets in Texas to be unable to supply near enough homes (we are way below units built per 1,000 than in previous years).So, yes, if you are waiting, it’s going to cost you….a lot.

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