Housing is Over Built; Lumber is the Honey Hole
Most of the time, the daily news and world events do not have a significant impact on how we buy and sell lumber. This recent stuff is different. It’s scary. All the trade and economic balls are in the air, and politically the U.S. is arguably the most unstable of the three countries making all the rules...America, Russia, and China.
Not only are we dealing with global economic and social instability, we are engaged in a political Civil War. Lawmakers skirmish daily, watching one half of our governing body discrediting and weakening the other...all the while proclaiming that we are a safe nation because we are “free,” wealthy, and physically more powerful and resolute.
All of that, as significant as it is, does not change the fact that tomorrow we have to go to work and buy and sell lumber for a profit, so let’s begin with the big picture.
Our lumber market is in a transition period of adjusting production lower as not to oversupply declining housing demand. That’s right. I said it. Declining!!! Our dilemma is, where business is good, it is very good and that is where all the noise is coming from. Elsewhere there’s no noise…no talk of poor business in thousands of stagnant, under-employed rural communities. The U.S. Census Bureau, National Home Builders Association, and National Association of Realtors has no month-to-month data on where housing is not working. All we hear about is a strong national economy supported by the U.S. consumer, who on the average has $38,000 in revolving credit debt at high interest rates.
The propaganda continues to zoom in on prosperity, which does not include an obvious, over-looked increasing percentage of the population who cannot afford to own a home, and likely never will. We need a new number, akin to unemployment. How many folks are unwilling to own a home? If 4% is full employment, what % is full home ownership? I submit that, in the current economic, political, and social environment...we are at, or very near, full home ownership. The % of consumers that cannot afford a down payment, much less the added expense of home ownership versus renting, are the same consumers economists cite as holding up the entire economy.
The ruse is, the unqualifiable, pay-check-to-pay-check consumers are mistakenly counted among potential home buyers as are approximately 50% of millennials who will never have owned a home well into their 40s and over 30% who will never own a home.
I submit that 20–30% of “average Americans” who do not own a home either do not care that housing is not affordable for them or simply have no desire to commit to 30-year mortgages. Millennials, the backbone of the global economy, have changed the housing landscape.
I contend that housing demand for willing buyers is being met, even over supplied, at less than 1.2 million new starts, comprised of 900k single family and 300k multi-family units.
Now for the good news. The lumber market is still volatile and that is where the component manufacturer can make money, even in a slowdown...week after week. “How is that possible?” you ask.
Simple. LLG projects the lumber market will move up and down $475/mbft over the next 52 weeks. Historically, an average of 15 weeks will be unchanged. The remaining 37 weeks, prices will move either up or down $13/mbft. It would be an absurd claim to say I could save or make you that entire $475/mbft. However, I can say with confidence, I'll save you at least half of it by forecasting when the lumber market will rise and fall and providing weekly buying strategies. What is that worth? Total annual board footage bought divided by 52 weeks x $475 x 50%. Example: 10 million bft annually / 52 weeks = 192,307 (8.5 truckloads per week) x .475 = $91,345 x .50 = $45,672.50.
Customize this for your business. How many truckloads of lumber do you use in one week? I will save or make you $5000 over the next year on each one of those trucks.
I promise!!!
I'll even pay for your $129 monthly LLG membership. Call me now…336.516.6687
Looking Forward...ML
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.info.