Building Material costs - up or down in coming years?

[cbc58]

Anyone care to guess if the cost of lumber, windows, wire etc.,  will go up or down in the coming years?  Conventional wisdom would say that suppliers would lower their prices to increase demand... but that sure hasn't happened with the cost of plywood, lumber or wire.   It seems everything has shot up and not backed down much.   Will they ever go back down?  Will we get deflation ? ... or are we looking at paying $32 bucks for a sheet of plywood from here on out?

[Don_P]

There are short term fluctuations but the trend is always up. Sheet goods go up during storm season. Building ours out of pocket I think it might have been cheaper to have taken out a loan as the materials seemed to outstrip the interest I would have been paying. If the labor is considered "free" solid board sheathing might be worth looking at. They keep riding right at that pain point for me.

[Squirl]

Yeah, prices jumped in the past year and a half.  Everything is about 15%-25% more, even lumber.  Then again, before that, they were probably a little on the lower side historically.  I remember when many items dropped 25% when the housing bubble burst. 

They might go back down.  China slowing, Europe in recession, some energy prices are falling, may all contribute to lower commodity prices.  I don't bet that way though.

I remember tools and equipment that could have been bought for pennies on the dollar if you had the cash and after the bubble burst and people were over extended.

[Checi]

I built a shed at my old FL home 2 years ago and when I went in to price plywood for my 14x24 here,  I suffered a real sticker shock. I guess it wasn't my imagination that the stuff got a lot more expensive! 

[AdironDoc]

My neighbor's a mill operator and noted that although lumber prices have risen, an increase in Chinese and other foreign wood has profit very low for domestic mills. His opinion was that the import of wood will only increase now that the supply lines and distribution networks have been established for the foreign guys. End result? Downward pressure on wood prices, I suppose.

[Don_P]

To my knowledge there is no chinese wood hitting the shores yet. But... don't buy it, or the eurotrash. I've been furring down and levelling the ceilings the past 2 days trying to prep for the rockers, at least a day to go, dropping electricals etc $$ . The stuff is also weaker than SPF. Shoulda sent it back, gonna send it back if it ever happens again, done burnt some ears off.

[AdironDoc]

To my knowledge there is no chinese wood hitting the shores yet. But... don't buy it, or the eurotrash. I've been furring down and levelling the ceilings the past 2 days trying to prep for the rockers, at least a day to go, dropping electricals etc $$ . The stuff is also weaker than SPF. Shoulda sent it back, gonna send it back if it ever happens again, done burnt some ears off.

Wasn't there a story, few years back, about Chinese drywall boards being loaded with formaldehyde and other goodies?

[rick91351]

Wasn't there a story, few years back, about Chinese drywall boards being loaded with formaldehyde and other goodies?

After Katrina there was a lot of houses rebuilt with Chinese Gypsum which much has had to be replaced.  Houses were pretty much unlivable after the build or rebuild

[Don_P]

Yes, chinese drywall was here and was a problem, pre Katrina as well, but to my knowledge no chinese lumber is imported nor is it listed in the NDS species tables.

[Pine Cone]

As someone who has been in the tree growing business for the last 35 years, it is unlikely that lumber or plywood or even OSB will ever be much cheaper than it is now.  The price we get for logs bottomed out a couple of years ago, and this year prices are down about 5% over last year.  Last year was the best price for logs in several years due to a large Chinese export log market which has collapsed to some degree.

China does not have any surplus domestic wood to export.  It imports from most of the major wood producing regions of the world including Russia, Chile, New Zealand, Canada, the USA and SE Asia.  Don't expect to see China exporting wood anytime soon.  They do buy hardwoods from the PNW region of the US and then sell us back furniture made from that wood, but don't expect them to ever export lumber.  They are consumers of raw materials and exporters of higher value finished products. 

Their own internal demand is pretty huge, and they didn't plant extra forests 30-50 years ago.  Internal Chinese demand for wood exceeds internal Chinese wood supply's.   Traditionally they have imported wood from Siberia, but the easy to log and transport wood in Siberia is pretty much gone.  Politics, nationalism, and corruption are making it had to get Chinese funding to build transportation infrastructure in Siberia, although there have been some projects attempted.  No one expects to see a big increase in Russian/Siberian exports in the near future.

For an example of a long-term log and lumber price forecast made in 2008, look here...  http://www.ifiallc.com/PDFs/long-run_outlook_for_timber_prices.pdf

Everyone in the forestry business expects that log  and lumber prices will increase if and when housing starts go back up.  For the last few years the forecasts have expected housing construction to increase in a couple of years.  One of these years they are going to be right, and that will drive the prices of logs, lumber, plywood and OSB up to higher levels.

[Native_NM]

Cheap energy drove the 20th century.  I vote prices will stay high due to higher energy costs and increased demand from the rest of the planet.  We are only 300/7000 of the population. 

[Don_P]

Well, you know I'd have to cypher that one. 1 in 23 people is us... and they all want to be like us. The demand might be pent up right now, but when it breaks loose, prices will rise.

I think I'm remembering that you're looking in NC. One other way of sourcing lumber and boards, I believe they still have a native lumber law that allows you to build with the self approved wood from your property. Time flies, we did that 2 decades ago. For us in VA the residence must be graded lumber but ag buildings are exempt. The lumber in my shops and barn was all imported from within a few hundred yards. Might be something to consider while looking at land.

[muldoon]

A real good friend of mine has land in Riverside, TX.  He is ag exempt for pine tree farm, he bought the land from a tree farmer and is basically surrounded in pine and the logging and paper industry.  There are different markets for wood, from paper to board foot lumber, and prices have been abysmal for the past two years.  I cannot imagine Chinese wood being much of a factor when the trees in our own country are not being harvested for what they cost to grow...  as in the cost of rain, time and subsidized agriculture exempt taxes on the land. 

I have not called an inflation / deflation wave in quite a bit, although I did use to pontificate on this subject here.  I think overall we are nearing the 70s stagflation configuration, where things go up and down, but overall the things you need go up a bit and the things you want go down a bit; and the corollary, things you sell cost less than you bought them for in many cases.  The only downside is that wages never quite seem to increase therefore as a population we find ourselves chasing an increasing cost of the things we need, with the value of what we have to acquire it decreasing. 

I have no idea what the future beholds, more than likely, just more of the same.  My expectation is that prices will continue upwards.. at least as long as the amount of credit in the colloquial model is expanding.

[CjAl]

in southeast tx logging is the only industry we have and its dead. 3/4 of the loggers have closed doors in the last 4 years. my wife family have logged for three generations and they declared bankruptcy this summer. our local mill closed last year.
  aparantly a german pellet co just bought land tobbuild a new mill. they will turn the wood to pellets and ship it back to germany. 275 direct jobs in an area with 0 jobs and there was actually a group protesting. go figure

[rick91351]

Here in my corner of the northwest logging is dead.  Mills are all gone except for a few in Oregon.  Idaho still has a hand full but WOW!!  There was a mill in every mountain town.  Union Pacific is still handling train loads of lumber out of Canada.  Mostly billed to HD and Lowes.

[Squirl]

Yup Canada.  My recollection was most U.S. lumber still comes from there.  Our prices started to rise a few years ago when energy prices shot up and their currency got strong.  When they became one of the primary suppliers of oil to the U.S. from tar sands, it boosted their currency and increased lumber prices.   

[rick91351]

Seems as if we cannot do anything for ourselves anymore.     Okay we can consume.......  

   

[cbc58]

Tks for the different viewpoints.  I continue to hold out hope that prices will decline in some magic fashion and plywood will get back to $18 a sheet.  Pretty disheartening the quality of material that is for sale and just how poorly houses are built these days.  In my area they sometimes don't even use wood for sheathing... it's a black compressed felt board over which they put hardiplank siding.  Houses that were built 10 years ago have sagging roofs from the shotty sheathing that was used, etc., etc.   Hard to find a well-built house with good materials anymore.

I don't understand this economy and often feel I'm living in a made-up Matrix-like world where we are conditioned to believe one thing and reality is another.   People forget that most banks are technically bankrupt except for the fact that they changed an accounting rule at the height of the crisis that makes them look sound.  Most people are leveraged to the hilt, finance everything and live paycheck to paycheck.  If we get to the point where the SHTF for real... maybe plywood will get to $18 again... or less.  I just can't see prices continually going up... something will eventually give.   

A few pundits tie just about all economic activity to the price of oil.. and I guess if that goes up then we know what to expect.   That, and taxes...

[John Raabe]

When the bottom fell out of the housing market a few years ago, many small mills and builders went out of business. Prices dropped while supply lasted but that is gone now. Trouble is that any new building demand is sucking on a straw with nothing in the pipeline. Prices go up because there is little supply. You would think that the small timber guys that will log small acreage would be back to work filling the demand but there is nobody left standing in my area.

[Pine Cone]

Yup Canada.  My recollection was most U.S. lumber still comes from there.  ...

Actually, the Canadian lumber imports to the USA are about 1/4 of the amount of lumber grown in the USA.  Round numbers, a monthly average of about 1 billion board feet of Canadian lumber imports a month and another 4 billion board feet of lumber grown in the USA per month.   Not counting other sources, that makes Canadian lumber at a maximum of 20% of the USA market.

Canadian lumber imports to the USA have peaked due the the mountain pine beetle epidemic.  Canadian Forest Service projects a large drop in western Canadian wood production over the next 20 years due to massive amounts of salvage harvesting of beetle-killed trees in the last decade.  Lots of forests have been killed, the remaining standing dead wood won't be good for much in another couple of years.  It will take decades for those forests to return to their former states so that they can be harvested again.  Until then, there will be significantly less wood being harvested by 2020. 

I will have to agree that the forestry and logging industries are hurting throughout North America.  The number of mill closures in the last 20 years is staggering.  The company I work for shut it's last mill in our area 14 years ago.  Federal timber is pretty much off the market and is likely to remain that way.  The ownership of large private forestlands is very different now versus 10 or 20 or 30 years ago. 

Tax laws have forced vertically integrated companies to split apart into separate timberland and milling companies.  Many timberland owners are now REITs (Real Estate Investment Trusts) and lots of owners have relatively short investment horizons of 7-15 years, a fraction of a tree's life.  Forestland values have risen which will help to increase the price of lumber and other wood products. 

Fewer people are willing to do the hard work it takes to be a logger, and logging has gotten more mechanized making the cost of being the owner of a logging company go up.  Fuel costs make it more expensive to haul logs from the woods to the mill.  If the cost of land, logging and hauling go up and the price of logs doesn't change, then it makes the stumpage value of the log less.  If stumpage values drop low enough, forest landowners like the company I work for stop cutting trees down since it makes more sense to let them grow rather than harvest them at a loss.

It is a big, complex market, but end result is that lumber and other forest products aren't likely to be cheaper in the future.  Of course you can always build with straw bales, metal studs, or whatever, but I don't see the price of lumber substitutes going down either.

[John Raabe]

Thanks for that insight on the industry Pine Cone. Building is still relatively expensive and likely to stay so as you mention. This is especially true when compared to the under priced existing homes available in many places.

There are some real deals available if you are looking to homestead in Detroit.

It makes you scratch your head when you consider what can still be built inexpensively. Glenn's development of the Mike Oehler Underground house system comes to mind.

[cbc58]

Thank you Pine Cone for the info.   Wonder what the markup is for plywood / framing stock from mfg/distributor to retailer like HD or Lowes... 30% maybe?   

Everything produced/mfg. really does seem to be tied to the cost of energy and oil.