Lumber - Future Outlook

Here today with a slightly different update. In this post I provide my opinions and speculation on the future outlook of lumber.

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The Good News

Starting with the good news, lumber futures pricing has dropped roughly 54.5% from the astronomic highs. With the economy reopening we can expect supply chains to return to full operation to drive down prices even further. Resins and other manufacturing materials are also back in production, which should help crank up production output across the nation.

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The Bad News

The bad news however is that futures are pricing the new floor for lumber contracts to be around $800 next year. Now this can change at any moment with new enacted policies or unforeseen catalysts. If we roll with this data, we cannot expect pre-covid lumber pricing to return anytime soon. Since retailers have seen how much the public will pay for lumber... a new floor has potentially been put in on the prices.

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So what does this mean for real estate? Housing inventory can increase with increased manufacturing productivity while home values continue to appreciate as demand still outpaces supply. Alternatively, the median home sale prices may retract a tiny percentage with increased inventory, but prices will still be relatively high due to lumber costs.

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Bonus

As a bonus, I’ve included chart scenarios using fibonacci retracement levels. It'll be interesting to see how the market plays out against my scenarios.

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I hope you found this information useful as I did. The more we know about market movements, the better prepared we can be before we make big real estate decisions.

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Talk to you guys again soon!