There are multiple Overlooked Obvious housing conditions that scream “runaway supply of shelter” is already in process.
- First and foremost, let us differentiate between housing and shelter. Housing demand implies one dwelling for a household. A household is not a family unit...spouses, kids, pets. Households in 2020 are the assortment of people who dwell under one roof.
- This misperception errantly projects that, over the past decade, housing has fallen behind population growth, which is not the same as household formations.
- Latest census data reveals household formations are declining compared to the last four decades by more than 20%. More people. Less families.
- The perceived need for increased housing is a one-off, pandemic-induced desire to spread out. Reality is, people cannot afford to spread out, which is why 30-somethings still live at home, extended family share a dwelling, and the real biggie Overlooked Obvious, Build-To-Rent boom that is/was funded by government stimulus.
- Savings rates and cash on hand has risen over the past two years, which has afforded renters to upgrade from an apartment to a house, or move away from Mom & Dad and get an apartment. That free lottery ticket has already been scratched off and cashed in and there are no more freebies coming.
- All residential building, single and multi-family, build-to-rent, and remodel are powering ahead as though the Fed will continue to pay.
Why would someone choose to rent a home rather than buy when properties are so scarce and building equity rapidly? They know they cannot afford to stay. Build-to-rent and a new apartment is nothing more than a vacation. Check out date is when the money runs out; and it is going fast with inflation at 7% and no more stimulus.
Never Before Released TRADING Secret
It’s Friday afternoon and my son Luke asked me, “What would you tell your Inner Circle to do next, assuming that they had followed your advice since the beginning of November?” What a timely question.
While most of the industry is struggling with delayed shipment, supply issues, and prices headed to $2000, what is the play for those who covered through March back in early November?
If you have followed the inventory suggestions, congratulations: you win big! My advice to everyone now is to expect significant price increases over the next three weeks. Begin leaning inventories in early March and plan to keep only the low end of necessary stock on hand from April through August.
Now I want to give you my secret golden rule, never before disclosed because it defies industry behavior. “Never be afraid of running out of lumber near market cycle highs, March through May.” That plays against all lumber industry belief of “Never run out”...for fear of losing a customer.
It is better to be out at the top than adequately stocked. Why? Tops occur when the market is over bought and, ironically, business slows when markets peak. Your customers will not be scurrying to help you liquidate. They will run like scalded dogs. Buyer urgency will be transferred to seller urgency.
The first 2022 cycle peak is mid-March, week #10. The second and historically highest peak is early May, week #20. That makes mid-March through mid-May the most highly volatile and risky months of the year.
Looking Forward...ML
Is a 2-month FREE trial too long? www.laymansguide.com. A veteran lumberman, Matt Layman publishes Layman’s Lumber Guide, the weekly forecasts and buying advisories that help component manufacturers save money on lumber purchases every day. You can reach Matt at 336-516-6684 or matt@laymansguide.com