2020 Hindsight
2020 hindsight. Deduce deeper. Look farther than the end of my nose and keep asking, “What’s next?” I didn’t do that at the beginning of the pandemic. I failed to consider how men specifically would respond to the lockdown. I saw hangout at home, catch up on some honey-do’s and spend more quality time with the family. A break from office problems, just Dad or hubby surrounded by bodies that follow him around every step of the day. “Honey can you come here?” “Can we play Chutes & Ladders again?”
Uh-uh...that ain’t gonna work. Dad just gave up his alone time and was literally on lockdown, confined if you will. Sorry ladies. It’s DNA.
Look deeper. What’s next? Space, separation. That phenomenon is not over, especially with COVID on the rise, more parents working from home; work and play accommodations are needed. It is just beginning. 2020 was the knee jerk reaction. 2021 will be a planned response... proactive. Another big year for treated lumber, home office and exercise room additions and more square footage. This time around contractor yards, truss plants, treaters, big boxes will not be caught off guard. They will build inventory over the next eight weeks, with a light break at year-end.
That said, I believe builders are already in big trouble. For the first time I can remember the housing market is oversold and under supplied. 6–12 months out to break ground at record high prices and 99% assurance that in Q1 2021 every component of a house will cost more is common. There is no extra pool of trained jobsite labor. Housing is maxed out at 1.2–1.3 mm. The delays already in place for windows, appliances, tubs, insulation, wallboard, pick any component... will stall Q1 2021 completions. Yes, housing will boom into Q1 then hit the wall. Not because demand will be squashed, 2% 30-year fixed mortgages will assure that. Rather inability to complete on schedule.
2021 Foresight
Housing redo’s as well as new home construction will assure strong demand... to begin the year. But there are major hurdles, likely unable to clear. The housing wall will be the result of three phenomena.
- 10 million fewer jobs in the service industry due to COVID. That will cap multi-family demand.
- 3.5 million mortgages (7% of all mortgages) are in forbearance. Fannie Mae and Freddie Mac mortgages in forbearance are declining, 4.5 this week. Those are the good loans. On the other hand, higher risk low credit Ginnie Mae forbearances are up 9.1 to 9.5% and applications are rising (VA & FHA loans). Forbearance is not forgiveness, it is delayed repayment, either lump sum, increased payments or tacked on to the end of existing term. All options are long term negative and the reasons for the forbearance in the Ginnie Mae category have not disappeared. The first round of forbearance ends in January.
- This is the biggie. Delayed framing package deliveries due to inability to get certificates of occupancy resulting from other-than-lumber products delays.
The condition will be visible to the naked eye. Active jobsites will look stalled, evidenced by installed framing lumber, specifically trusses because they are most visible, will change from bright yellow to gray in color.
That is evidence that future lumber packages will be delayed. It is critical that buyers not panic and double-buy when the next round of buying spikes and mills fall back on late shipments. Remember how quickly 6-week shipment in September came three weeks early.
The next round of builder releases, November, will be at a 1.5 million housing start pace. Lumber prices will rise. I expect this next round of November/December framing packages will experience delayed completions, stalling the winter rally and extending lumber supplies, creating over-bought/supplied conditions in winter. Nov/Dec rally; Jan/Feb weakness.
Looking Forward...ML
Are you fed up with being caught on the wrong side of the market...losing orders because your lumber prices make you uncompetitive. I can assure you the orders you lose are not because the other guy is selling at a loss. It’s not you or your buying style. It’s just timing. I forecast when the Lumber Market will rise and fall. No one else tells you months in advance when prices will reverse....no one! Call me 336.516.6684. www.laymansguide.info