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Lumber Futures and Cash Prices Crashing

6/17/2021

Futures fell by 41% "The rapid decline suggests a bubble that has burst"

  • Futures fell by 41%.
  • "The rapid decline suggests a bubble that has burst".

Source: Wall Street Journal

  • Before the fall, lumber prices went from ~$250/1K feet to ~$1,700.
    • Causes:
      • Longhorn Beetle decimated nearly a decade's worth of Canadian Lumber, a major supplier for the US market.
      • 2017-2018 wildfires.
      • The Mortgage-backed Securities Crash of 2008 led to a 49% decrease in lumber demand and the subsequent closure of 30+ large sawmills.
      • Stimulus cash, low-interest rates, and the shift to work-at-home caused a surge in home improvement and renovations.
      • Builders and Supply Depots hoarding wood stock (Source: WSJ)
    • Results:
      • +$36K on the average single-family home.
      • +$13K on the average multifamily unit, $119/month in rent.

Source: National Association of Home Builders, the Hustle, NASDAQ

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