The Expert Podcast

Market Trends in Lumber Industry
  • The lumber industry is facing significant challenges as the demand in the remodeling and DIY project market declines sharply.
  • New home building remains robust, but economic factors are causing a downturn in home improvement activities.
Impact on Lumber Yards and Production
  • In regions like Oregon and Vancouver BC, several lumber yards and production companies have closed down recently, resulting in substantial job losses.
  • Even hardwood yards are beginning to scale back operations due to the economic slowdown.
Economic Factors Affecting Demand
  • Higher interest rates, currently around 7.5% to 8%, are pushing many potential homebuyers out of the market.
  • The elevated costs of lumber and labor have also contributed to the decline in home construction and renovation activities.
Challenges in New Home Construction
  • Despite a backlog of homes to be built, the affordability issue persists as home prices rise, making it difficult to build homes in the $400,000 to $500,000 range in many markets.
Impact on Home Improvement Chains
  • The weakening demand for home improvement products is beginning to affect large retail chains in the industry.
Call to Action and Audience Engagement
  • Discussing the current labor market conditions in different regions, highlighting the varying demand for different trades such as electrical, plumbing, framing, insulation, and roofing.
  • Encouraging audience participation to share their observations and predictions about future market trends, especially regarding lumber prices and labor costs.
Conclusion
  • Despite some fluctuations in lumber prices, they remain relatively high, impacting consumer decisions on home upgrades and construction.
  • The ongoing challenges in the lumber industry are likely to have lasting effects on the housing market and the broader economy.

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The last remaining market for the lumber industry is starting to deteriorate. Obviously, new home building is still up, but a lot of the home remodeling has been done. People who had to stay in their house due to the pandemic, interest rates, or the economy have pretty much completed all they're going to do on their homes. Now, with the economy deteriorating further and higher interest rates, there is much less activity in home improvement. That's starting to affect lumber yards.

In Oregon, on the Oregon coast, three lumber yards and lumber production companies have shut down in the last 90 days, resulting in several hundred lost jobs. This trend is visible in the Pacific Northwest, even as far north as Vancouver, BC. Even some of the hardwood yards are starting to cut back.

We're already starting to see more and more of the economic impact on lumber and construction. There is still a backlog of new homes to be built; however, demand is starting to fall off due to high interest rates. When interest rates were lower, there was a big boom, but now, with rates almost 8%, many people are being priced out of the market.

For example, a $500,000 house at 7.5-7.8% interest could mean a mortgage payment of almost $4,000 a month, and with tax and insurance, in some markets, it could total close to $6,000 a month. This has significantly impacted the lumber industry and even affected home improvement chains.

So, what are you seeing in your market? What do you think will happen? What's the labor market like in your area for contractors and tradesmen? In most markets, specialized trades like electrical and plumbing are still busy, but what about framing, insulation, and roofing?

Lumber prices did come down from their peaks a few years ago but remain relatively high. For instance, in some markets, OSB (oriented strand board) can still cost around $50 for a 4x8 sheet. Labor rates also remain high, with skilled trades charging $30-40 per hour, which is affecting home upgrades and reducing volume, thereby impacting the market and the percentage of homebuyers who can afford a house.