Why are Lumber Prices Skyrocketing!?

Episode 585 January 29, 2022 00:47:50
Why are Lumber Prices Skyrocketing!?
The Weekend Warriors Home Improvement Show
Why are Lumber Prices Skyrocketing!?

Jan 29 2022 | 00:47:50

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Hosted By

Tony Cookston Corey Valdez

Show Notes

Tony and Corey discuss why lumber prices are skyrocketing again.

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Episode Transcript

Speaker 1 00:00:04 Welcome to the weekend. Warriors home improvement show built by bar lumber. When it comes to biggest wall projects around the home, Tony ACORE you've got the know-how and the answers to make your life just a bit easier. Yearly are your weekend warriors, Tony and Corey. Speaker 2 00:00:25 Hey, welcome to the weekend. Warriors home improvement show built by power lumber. I'm Corey Valdez and I'm Tony Crookston. Thanks for tuning in with us today. We've got another great show lined up for you. We got a email from a listener, Richard Bessie. Uh, he's emailed us several times over the years. We're always glad to hear from him, but he had a question about lumber prices and I tell you what lumber prices have been on the forefront of my tongue for the past two years. Yeah. And I know you probably talk about it all the time, Tony, and you know, Tony and I work in the lumber industry work for Parr lumber company. So we're kind of deep into it. So we've got quite a bit of insight that we're going to share with you today regarding lumber prices. And you know, the last time I had this conversation, the same thing happened last year, where lumber prices just started skyrocketing. Speaker 2 00:01:20 And if you've built anything in the last year to year and a half, two years, you know what we're talking about because the average cost of lumber has gone up so much. The average house package has gone up almost $20,000 and that $20,000 gets passed on to the person buying that home or renting that apartment or home. And it's kind of crazy what we're looking at right now. And we don't really see any relief in sight. Uh, the market's going to go up, it's going to come down. So anyway, we've got some, some insight into why that happened and maybe what's going to happen in the future. We have no magic eight balls here, but Tony and I have been doing this long enough where we can probably, uh, tell you what to expect. At least at least what we are expecting was funny, Tony, uh, you know, you get these emails too, but people that are in our buying department, we have a buying department within our group and we get emails from them three days a week that kind of tell us what's going on in the market. Speaker 2 00:02:20 And what's funny is one of our buyers in almost every email, he says it could go up, but it might come down. Yeah, but it could go back up. So it's kinda like a, like anything, the, the lumber market is just like any stock market lumber is bought and purchased on a daily basis. So anyway, I actually want to start off this conversation because it is my opinion that this problem that we are currently experienced started back in 2008, hear me out in thousand eight, we were way overbuilding in our market and not in, just in our market, but in the entire United States, we were overbuilding by a lot. Uh, we hit 2.2 million housing starts, uh, in 2005. So during that time period, we all know what happened in 2006, seven and eight, and the impending crash that happened. The recession, the great recession in a lot of that had to do with housing. Speaker 2 00:03:28 People were buying houses, they couldn't afford. We all know what happened. Well, during leading up to that, the market was so hot. We were overbuilding. We were building 2.2 million housing starts every single year. And what, what that led to is kind of a bubble, right? And that bubble popped. And if you look at how many houses we need over the course of, at any given time, our population in the United States is, is increasing every year. So we have to build X amount of houses every single year to accommodate the people that need them. And at that time we were way overbuilding. So after the great recession, we had hit 550,000 housing starts. So we went from 2.2 million. Housing starts to 550,000 housing starts, which if you look at the line, we need to hit around 1.3 million. At that time, we needed to hit about 1.3 million housing starts on average to have a balanced inventory balance inventory. Speaker 2 00:04:33 So from 2004, 2008, we were way over building. Well, fast forward to 2009, the great recession, we, everything tanked. We all know that everything tanked all the housing bubble burst in consequently, there were years, years worth of houses that were constructed during oh four to oh eight that needed to be sold through. And on top of that, all of the foreclosures, all of the short sales, all of those houses that went back onto the market. So we literally had so many houses on the market. We didn't know what to do with. So housing starts tanked down to 550,000 in 2009. That's where it bottomed out. And then consequently lumberyards, such as Parr lumber, we stopped selling so much lumber people. Weren't buying people, weren't building houses. So if we weren't buying it, the mills couldn't mill it. So literally tons of lumber, mills, plywood mills, all closed down, OSB closed down. Speaker 2 00:05:39 So fast forward to pre pandemic, 2019, we were hitting about one point, uh, where were we were 1.3 million housing starts, which was still slightly under building for, for now, you know, 10 years later or more than that, 15 years later, right? We, we needed to be closer to 1.8 million housing starts. So we were still under building at that time on the same amount of lumber mills that we had in 2010. So after all those lumber mills closed, we had an X amount of lumber mills. Now we've kind of peaked. We've kind of maxed out all of the material we're getting from all of these mills at that time pre pandemic. So now 20, 20 March, 2020, we COVID 19 hits. We start lockdowns USA started lockdowns. Canada started lockdowns and Parr lumber along with every other building supply company in the country said, whoa, this is going to be another great recession. Speaker 2 00:06:47 You know, people are going to stop building. So we stopped buying lumber. The people we buy lumber from the mills, they stopped milling in all the, in between vendors and brokers. They stopped buying because we were preparing, we were bracing for the worst economic crisis since 2008. Right? Well, guess what? That didn't happen in April of 2020. Uh, we hit, we bottomed out. It actually tanked, uh, by a lot. I had the note here somewhere, but, uh, oh yeah. Dropped 26%. Housing starts to drop 26% in April of 2020 because we thought it was going to say so now by the, by June we realized, oh no, it's not slowing down. 2020 was the busiest year that Tony and I had ever experienced working at Parr lumber because people were still building builders were still building homeowners. We're still building. A lot of people stayed home causing this lumber market shortage. Now, when you look at it like that, we, the lumber mills in the OSB mills did not react fast enough Speaker 3 00:08:03 Not to mention when they did react. They didn't have a full staff because a lot of people were suffering from, from COVID-19 and were having to quarantine. And so even trying to put a team back together to get busy, to get back to work, they couldn't Speaker 2 00:08:20 Do that either. Right. And you know, with the COVID restrictions that went into place, you know, you couldn't work within six feet of somebody else. So a lot of the lumber mills that were open were operating at limited capacity limit, much limited capacity. So if you, if, if you remember fall or summer of last year of 2021 lumber prices started skyrocketing, and that had solely to do with the reduced amount of lumber that was in the market with supply and demand, they could not manufacture it fast. Uh, they would sell out their order files were out months and months and months. So if you wanted a truckload part, if Parr lumber wanted to buy a truckload of OSB, you had to pay for it. We had to go out and we had to outbid somebody else that was paying for it at another place. And so the prices kept going up and up and up and up and up. Speaker 3 00:09:17 Meanwhile, contractors, essential workers, uh, by CDC guidelines, we're still going strong. That's right. And they were building and building and building. And we were in our busiest year on record. And when I talk about busiest year on record, I'm talking about just sheer volume, just lineal footage and board footage of material on trucks, going out to the job site. We were having our busiest year on record, right. And with the fewest amount of mills that were available with the fewest amount of workers to man, those mills that were available. And that was ultimately at that time, the Speaker 2 00:09:55 Perfect storm. Right. So then we've sold through all of the supply chains. There's if you think about how, or if you know, how lumber is, it makes it from the forest to your job site? Uh, basically it goes like this, the, the loggers cut it and they sell it typically on the open market, or they sell it to a lumber mill, however that works. And it makes it to the lumber mills log deck. And it sits on their log deck until they cut it. And after they cut it, it gets milled and depends on, depending on who buys it, there's lumber brokers and who buy it. And then they play their own market and try to sell it for a profit or there's larger companies like Parr lumber that we buy direct from the mill. And then it comes to our location and then we sell it to our contractors and builders and then sell it, send it to the job site and homeowners and homeowners. Speaker 2 00:10:51 And there's other things in their specialty lumber where, where it might go to, uh, you know, a re a wholesaler and then the wholesaler sells it to Parr lumber. It kinda just depends. That's the supply chain. And that lumber usually comes in on rail cars from Canada, or, you know, lumber, a lot of the lumber that's manufactured or milled, or the lumber that we use in the Pacific Northwest is milled in the Pacific Northwest. Most of it, Douglas for all of it. Um, but a lot of the softwoods come out of Canada. OSB comes out of Canada, so they get loaded up on these rail cars and they come down and there's something like, I don't remember how many units of OSB are on a rail car a lot. Yeah. It's a lot, it's something like three truckloads. So 60 units, something like that, 60, 70 units. Speaker 2 00:11:40 So times hundreds of rail cars coming down, right. I mean, there's tons. Well, and then when it comes down, it comes to these brokers, it comes to these reload yards and it sits there waiting to be sold soul to, or, or made room. So we might've bought it and we're storing it in, what's called a reload. And then when our lumberyard gets low, we bring it in and then we constantly keep those supply chains full so that as we need it, you know, we buy it in the lumber prices fluctuate on average between what did we look at between three and 500, a thousand, right? Everything's measured in board footage. So per thousand board feet. And if you go back historical records, you go back to 2012 is all we could find. It was between 300 and 500 a thousand, which is what I remember most of the time, most of the time. Well, in 2011 or 2021 last year, we hit 1700 a thousand, which is absurd, Speaker 3 00:12:39 Right? Three times like the highest number we'd ever been used to plus Speaker 2 00:12:43 In a lot of that is because in 2020 we hit the highest it was. So, or 2021, we peaked out at about a 1.8 million housing starts. And that's monthly, which is an incredible number based on lumber mills that we had from 2010. And we were, couldn't keep up. And then all of those lumber mills were at a reduced capacity. So that's what happened in that, that supply chain issue. It really was a perfect storm. And then as we all, if you built anything over the last four months, you know, the lumber prices tanked and now we're starting that process again. Speaker 3 00:13:26 Yeah. And in addition to the builders that kept the building and the homes that were still being purchased. In addition to that, to just add another bit of weight. On top of that scenario, we had quarantining and the pandemic, which caused, uh, thousands and thousands of people to have to work from home. And as they were working from home and the government was sending them funds to help them get by, they were, they were at home a lot of time spending less than they were spending when they were driving to work every day and making the same money. And in addition to that, getting funds from the government, which allowed them to tackle home projects while they were home during that entire time, which has been now, you know, we're going on two years, that it's been, since people have been working from home. And so that was more home projects by homeowners and DIY wires and weekend warriors than we'd ever seen in that same timeframe ever on top of that by a little on top of more housing starts and contractors that never stopped. And on top of not enough mills and not enough people to man the mills that were, Speaker 2 00:14:38 But on top of just like saying on top of yeah, but on top of all that historical low interest rates, right? Historical. So if you can go out and buy a house, even if it's four or 500,000 or $600,000, the interest rates are so low as a starter home. I mean, in the Portland area, we're seeing housing that is starter homes that are 5 50, 600, 6 50 for starter homes, which blows my mind coming here from the Midwest, you know, almost 18 years ago, I never imagined a house over 300,000. That was a mansion. Speaker 3 00:15:20 And now consider the fact that because lumber prices skyrocketed so much because demand was off homes were still being built because they didn't stop building. They paid the prices that the lumber became, it got higher and higher and higher, and they paid more and more and more, and the cost more to build the house, which ultimately resulted in homes being worth more than they were before increased value of homes, entices buyers. So they want to get into a home because the home values are appreciating, which Speaker 2 00:15:55 Increase it entices builders to build Speaker 3 00:15:57 Exactly. And that closes the whole circle. That's why it's happening. We're building because we need inventory. Home values are up. Mortgage is low. Inventory is low. And so we're buying and we're, and we're building and the prices are going up and it's just going to keep going that way. And we don't have enough mills and we don't have enough product to keep up with what was happening in 2021. Speaker 2 00:16:22 Yeah. Yep. And if you look at any inventory level, uh, over the last, you know, historical timeframe, we are at an all time low, the United States is an all time low of inventory on all housing. So Speaker 3 00:16:39 You were talking before about, uh, the recession and how you said we bottomed out somewhere around 250,000 homes available. Speaker 2 00:16:48 Uh, no, no housing starts 2000 Speaker 3 00:16:51 Hearts. They had 250, it was Speaker 2 00:16:53 500 5550 housing starts in 2009, which was a record low. Right. Speaker 3 00:16:59 Well, we're sitting on now, uh, 280,000 homes that are available, which should be in order to be in a, in a balanced market, should be up over a million. Yeah. Should probably be five times that, Speaker 2 00:17:16 Yeah. So right now, according to the national association of realtors, we're sitting on about two months of inventory of all housing inventory, Speaker 3 00:17:27 Which should be six months for us talents to be a balanced inventory gap. So we're behind, after an amazing, unbelievable year of massive volume material shipped out and homes built in 2021, we're still behind. Yup. And with mills struggling to fill the supply chain, we are going to continue to be behind at least going into 2022. Speaker 2 00:17:52 Right. And now moving forward, there's a, there's actually more challenges you could throw. We have several more challenges to throw into the mix. A lot of the OSB we get and the softwoods come down from Canada. Well, very recently, uh, the Biden administration has doubled the tariffs on Canadian lumber imports into the U S so that has increased pricing volatility. Uh, we still have really bad supply chains and, uh, you know, trucking and truckers. It's just short. It's going to be a really, really rough year. Now that being said, if I had a magic eight ball, I would think that as we, you know, we move forward through this year, right now, there's a really big shortage and people are kind of mimicking and seeing what they did last year. They're being, we're being very cautious in how we buy lumber because at the end of 2021, when the, when the lumber market tanked, um, a lot of retailers got stuck with very high priced inventory that they had to move at very low prices because that's just how it works. Right? So we're being very cautious. And the inventory levels that are out there on some items is really, really bleak and on others, it's not. So I think a lot of people are looking that, looking at that buyers anyway, um, cautiously and buying accordingly, but Speaker 3 00:19:32 Different than the such situation that we were in right in 21, where we were short on product across the board, across the board. I mean, it was, there was so much of a demand for products, all the Speaker 2 00:19:43 Products, you name it. We didn't have it, that we Speaker 3 00:19:45 Were short on everything. I mean, all the way to hardware, screws, nails, uh, paper citing, um, sub sheeting and framing and all of the things. I mean, everything was difficult to get. Everything was more expensive, everything. And so the situation now is not exactly the same, uh, but, but there are, um, there was a feeling of the same, Speaker 2 00:20:09 Well, and, you know, take into consideration too. Uh, as a lot of the lumber mills up north are frozen in right now. And as those thought out, there'll be able to get product out and get it into the United States. Well, maybe, Speaker 3 00:20:22 Well, if we don't have flooding issues like we had in 21, right? I mean, we didn't even talk about the flooding issues in Canada. We didn't talk about the wildfires that were burning in the United States. Those, I mean, we were talking about the perfect storm. There was a lot of things that were taking place that, uh, that were causing this really big situation. We're not facing those things, uh, right now going into 22. But there is the possibility of that. There is the possibility of more flooding in Canada, which slows down the trucking and results in product, not being on the, on the ground when we need it. There is a possibility for wildfires, uh, you know, that will rage and burned down the product that we're using to build homes. It's a possibility, of course, we can't see that. Speaker 2 00:21:09 And here's the other thing. The other day, the fed announced that they were raising interest rates. They were going to raise interest rates throughout the year. So how is that going to affect housing starts, how's that going to affect home buyers? Are people going to go out and still buy houses like they are now because it's been, it's been a ride and we all know this. If home buyers aren't buying in builders are going to slow down. And so they're not going to build, you know, so that could affect lumber prices too. And my feeling is that's, what's going to happen. If I had a magic eight ball, I would say that lumber prices are gonna come down. Um, in the next quarter Speaker 3 00:21:53 And mortgage rates Speaker 2 00:21:53 Are going to go up. Yep. Mortgage rates will go up. Well, I'll tell you what. And a lot of that frozen material is going to make its way into the market. Again, it's going to get flooded saturated, and then the prices will drop that's my, Speaker 3 00:22:05 So here's what I'm thinking. Whether the price is whether or not the prices drop and whether or not the interest rates go up, we still have four months of inventory that needs to be built. You know, those builders are going to build until they, until it stops. They're going to get to six months supply. And then the set, the situation is where are we sitting when we reach that six month supply? What do things look like at that point? Right? If interest rates are up and we've reached that six month supply, then I would say there's a possibility for it to slow down, but going forward right now, early 22, it's on like donkey Kong. It's happening out there. We got to take a quick break. When we come back more of what we know about lumber prices in 2022, you're listening to Tony core. Your weekend works. Don't go away. Speaker 1 00:23:06 You're listening to the weekend. Warriors home improvement, Joe built by Parr lumber. Now here's Tony and Corey Speaker 2 00:23:23 Hey, welcome back to the weekend. Warriors home improvement show built by Parr lumber. I'm Corey Valdez, and I'm totally Cookstown. Thanks for staying with us for the second half of our show. We've been talking about lumber prices and a lumber pricing is crazy. We want to thank one of our listeners who sent us this question. Uh, Richard, best love. I love listening, hearing from him. He's emailed us a few times over the years, uh, and if you ever, any of our listeners ever have any questions, feel free to reach out to us. Our email addresses weekend [email protected]. Uh, you can also go check out our YouTube channel. We are YouTube, uh, just search Parr lumber, or we can warriors home improvement show, um, subscribe, and like our channel. We would love that it's growing and we're putting tons and tons of content up there, uh, weekly. Speaker 2 00:24:12 So we actually have a new video dropping, uh, this week. So go check that out. Um, the other thing is, if you listen to any portion of the show that you missed and you want to go listen to it, you can always go listen to our podcasts. We try and upload those now weekly, after getting beat up from our listeners saying, where are your podcasts now? Uh, th th that's the thing that you'll, the pandemic just puts everybody into a thing. You know, it's so busy and now all of a sudden you throw this pandemic in there. We just didn't have time. And we were recording the show and airing the show, but we just, you have to edit it to go onto our podcast. And so we just stacked tons and tons of shows up and just never got to them. So we did that. We got all, we got it all up to date. The show will be on podcasts. You can go wherever you listen to podcasts, apple, Spotify, and download it and listen to it. Uh, what else, Tony? Speaker 3 00:25:10 Yeah, Speaker 2 00:25:11 No, that's the Facebook we're on there too. You can always go check that stuff Speaker 3 00:25:14 Out. I heart apple podcast. Speaker 2 00:25:17 Yup. So anyway, today we're talking about lumber pricing and, uh, before the break we were talking about how, you know, the great recession of 2008 is what kind of started this whole thing. The great recession started the ball rolling. Yep. We overbuilt CLO bunch of, you know, the, everything hit the fan lumber mills closed fast-forward pandemic. Everybody thought that everything was going to tank again, just like 2008. And when it didn't, we got kind of caught right. Between a rock and a hard place because we've sold through all the lumber in the supply chain and they've never caught up. And then when they finally did we get hit again with other issues? Like for instance, Speaker 3 00:25:59 Yeah. Uh, I know they've been talking, I read a few articles. They were talking about, um, wage versus price. So before the supply chain problems were a result of poor staffing or closed mills, or, uh, you know, fire restrictions flooding or yeah. All of the things. Um, but now, you know, one of the larger problems I think is, has come on by what they're referring to as the great Speaker 2 00:26:27 Resignation, the great Speaker 3 00:26:29 Resignation of 4.5 million people in one month alone. Speaker 2 00:26:34 Um, it was like 22 million people in the last year have quit, Speaker 3 00:26:39 Quit their jobs. They even said in there that a largest portion of were between the ages of 30 and 45. Uh, Speaker 2 00:26:46 Yeah, but it's not necessarily quit. They didn't quit. They didn't leave the job market. They moved to other jobs for better pay, better treatment, you know, better benefits, maybe flexible job. Maybe they quit their jobs so they could work from home. Speaker 3 00:27:03 Well, I'm going to say a portion of those people went from one job to another job. A portion of those people stayed home and collected unemployment. This is true because unemployment was paying better than some people were making by working 40 hours a week. This is true. And so, you know, I think that it was an opportunity that people took to take a minute and figure out what was going on. Obviously we know that the pandemic put things in perspective for people, right? Life is short. Um, I'm working, I'm married to my job. Uh, maybe I need to rethink what I'm doing or the work that I'm doing for the money that I'm making is soul crushing work. I need to find a company that appreciates me for who I am. I think people the great rethink on the great, a reset. Yeah. A great reset or the great, uh, there's a, there's a bunch of names for it now. There's definitely Speaker 2 00:28:00 Let's correlate that. How does that affect lumber prices? That's what our show's about today. Lumber prices. How does people quitting their jobs correlate? Speaker 3 00:28:11 Well, first of all, if you have a lot of people that are not working, then you have a lot of places that need people to work and they don't have people. Let's just say mills for an example, lumber mills, a lumber mill that runs on 100 employees who work the green chain and who run the saws Soyers and leads and supervisors and driver, all of those people, everybody. Yeah. If you lose 25% of your crew and you can't hire them back because they say I've got to go find some more work or something different or do something better in order to entice those people to come back, you're going to have to pay more money. You're going to have to offer something more. I mean, if you work at a mill, you can't work from home, right. It's true. You gotta be at the mill. And so overhead is what we'll call it. Overhead is up because wages are up because companies have to pay more to entice people to come back to work. Uh, places like McDonald's are offering a signing bonus, come to work for us. We'll give you a thousand dollars. I've seen that. Yeah. I mean, this is happening. Companies are struggling to keep the chairs filled with people who can do the job. And in order to do that, they're forced to raise their wage that they're paying out, which that overhead creates an increase in prices. Speaker 2 00:29:30 Yeah. True. I mean, yeah. If you look at historical lumber, mill pricing, like I said, it was between three and 500 a thousand and we hit 1700, but I, we Tony and I think that it will level off it'll drop and it will level off somewhere around 800 to a thousand. That's where it's just going to live from now on until, you know, it's going to slowly increase over the years, but that's where it's going to settle. Because like you said, you have to pay everybody more along the way just to keep them in the positions. And Tony, you're a manager, you're a, you hire people all the time. And I honestly think that Parr lumber has been hiring solid for the last four years. We have not had all of the positions, that part lumber filled. Speaker 3 00:30:19 I can't even remember. Nope. There's always an, there's always a job opportunities list with positions that need to be filled. You know, we're all, we, we are retiring people. We are promoting people and then we are training people. So we're always bringing people in and, and on top of that, we're expanding, which requires more people. Speaker 2 00:30:37 I'll tell you one word. I am tired of shorthanded. Yeah. Are you tired of that? Speaker 3 00:30:42 It's weird because I have really long hands. And so when a fingers, when people say, are you short handed? I'm like, no, I got, I got long hands. Corey shorthanded though. A little bit. Speaker 2 00:30:53 Sorry, but uh, no shorthanded. I mean that, that's everywhere you go. And like you said, the lumber mills are shorthanded. Everybody's shorthanded. They are paying people more to stay in those positions. Speaker 3 00:31:04 Yeah. There's some other things going on. I don't know. I'm not going to tell you what percentage of effect these things are having on the lumber market. But you talked earlier about how, uh, Canada's a big supplier of, of the lumber that Speaker 2 00:31:19 We buy softwoods and OSB. Okay. Speaker 3 00:31:21 So you've got a big portion of that that comes from Canada, right? Canada's having some troubles. Canada is, uh, changing the rules about what they can do with old growth lumber or older growth lumber. So they're putting restrictions on the age of the trees that you can harvest, leaving them with trees, that can't be harvested, leaving them with a situation where they have to close mills, because they won't have enough fiber to run and keep the mills open. In addition to that, they have a, a record loss due to a beetle that's killing the trees before they ever even can follow them and run them through. And if they've got this beetle in there, then they can't process that at all. So they're losing the opportunity to run fiber, which is causing them to close, uh, somewhere in the neighborhood of a dozen mills. And so that is going to affect the supply chain as well as we go forward into 22. Yeah. Speaker 2 00:32:17 You would think to, uh, I've heard this comment from lots and lots of people. Well, why don't they just open a new mill? Sure, sure. You know what? It costs to open a mill, the property that you need, the space, the actual machinery, the staffing, it's a pipe dream Speaker 3 00:32:35 And opening a mill is not any less risky today. Then it was, you know, when they closed the last one, right? I mean, it's, it's going to be a risky business is going to continue to be, and this is exactly why volatile lumber market is a, is a risky business. Speaker 2 00:32:51 Yeah. Earlier, uh, we were talking about conspiracy theories. Oh yeah, that's right. You, we had this conversation last year. I'm not sure if we had it on the air. Uh, but you, between you and me, we had this conversation. I thought we should bring it up today because it is something I've heard more than once. It's something you even saw in the media Speaker 3 00:33:10 Recently. Yeah. Recently lay Speaker 2 00:33:12 It on me. You kind of believe that. Speaker 3 00:33:14 Well, there was a lot of conversation. Um, when the lumber mills were getting back to work and the prices were up and product was starting to come out, you referenced with me. Um, uh, this is a subreddit that you saw where somebody had noted a picture of a building material supply place that had stacks and stacks of lumber. They're like 20 units. Yeah. 2020 units of, uh, of plywood and a, and they said a lumber shortage look at all that lumber sitting there. Well, and the fact is that mills got back to producing lumber and they were sending it out and building material suppliers were getting it. Were they getting as much as they needed to fill the needs of all of their customers? No, not even close, but we were getting it. And even though we were getting it, the price seemed to continue to rise or at the very least it remained flat and it wasn't coming down. Speaker 3 00:34:08 Even as the supply chains were filling up and our yards were getting stocked more and more with product, the prices still stayed high. And there was speculation that mills were continuing to not operate at full capacity by choice. And instead they were working at a limited capacity in order to keep lumber prices. High artificially. Yeah. Well I guess, yeah, artificially, if they weren't, if they were running one shift instead of two, or they were running two shifts instead of four, then they were producing half of what their capability was. And by producing half of their capability, leaving the market, still wanting more fiber than they were essentially keeping the market, keeping the prices high. That was the speculation. That's not what we're saying happened. Corey is saying it definitely didn't happen. And I'm just saying that it's a, that there's conversation about Speaker 2 00:35:06 People talking about it. I've heard that from many people saying, oh, the lumber mills, they're just, you know, raising prices and soaking everyone. Uh, you know, to some extent you could say, they're the ones making the pricing, they set the pricing for the mill, the lumber that we're buying from them. Um, are they making more money? Probably. Um, I would Speaker 3 00:35:28 Love to hear from making the money. Speaker 2 00:35:30 I would love to hear if anybody out there that works in a lumber mill or works in that industry that knows anything about this. I would love to hear from you email us. Um, if you've got any insight into this or tell us we're completely full of it. Speaker 3 00:35:45 I know that, uh, I had had, I've had conversation with guys that worked at a plywood mill, um, and, and the stories that they would tell me always sounded like that the mill we're in hand to mouth, right? I mean, you never knew when you were going to be able to run the material or not run the material guys would show up in the morning and there wouldn't be enough guys to open the mill and work. And so they would go home, uh, you know, and then sometimes they would be on a run and they would make and make and make and make and work all hours of the day and night to get as much done as they could. So it was very, uh, it sounded like that one place at that time with those people, uh, the, the workflow was very volatile and it, wasn't a place where you check in at seven o'clock every morning and check out at five o'clock in the afternoon. And this is the amount of board footage that got created. Right. The stories that I heard were much like that, it didn't sound like the kind of place where they were stuffing the safe with cash. Speaker 2 00:36:42 Yeah. I mean, you, you have to understand, uh, you know, there's raw materials involved there. Loggers have to log the, the material winter time. It's not as easy to log up in Canada. They can't. Um, so I think there's a lot more to it than that, in my opinion, on that conspiracy theory, I think it's completely ridiculous because I mean, think about this scenario last year, OSB reached the highest price I've ever seen in my life. I mean, just over $80 a sheet for one sheet of seven, 16 OSB, at one point I saw, um, if you were a lumber mill, making OSB against a competing OSB mill, wouldn't you as a company, want to manufacture as much of that OSB as you humanly, possibly could and sell it at $80 a sheet. I mean, wouldn't you, I mean, or would you say, nah, I'm gonna, I'm going to slow my production down to keep this price where it is. Speaker 3 00:37:46 If I'm being honest with you. I, I think that that type of a decision as well over my head, I could not fathom, uh, what it would be like to be making those decisions. But I certainly can imagine that, um, they weighed costs overhead. For example, if this is how many guys we run, and this is how much we can produce, and this is how much we can sell it for, well, we could do half as much, stay open, not spend that much on whatever and still be getting the same price for the lumber that we're selling for. Speaker 2 00:38:19 I heard, I heard reports last year from people in that industry that they were operating as fast and furious as they could to S to, to manufacture as much as they could to get it at that price to get it out the door. Yeah. That's what I heard. Yeah. And it makes sense. Sure. Speaker 3 00:38:41 Well, we won't know because we don't run or, or work at a mill where that is being done. We certainly aren't in the, in the boss's office listening to his conversations. Right. So, Speaker 2 00:38:52 Uh, we're just lumber Speaker 3 00:38:54 Guys. We're just speculating about, you know, what the things could be and, and it is an interesting topic of conversation. Speaker 2 00:39:00 Yeah. Nope. I totally agree. All right, Tony, let's ask this question. You asked me this question before. Speaker 3 00:39:06 Oh yeah. Well, this is really the big question. We've just spent all this time talking about what lumber prices have been doing, what lumber prices are doing now, what we think lumber prices are going to do forward. You said that you felt like it's going to level off somewhere around 800,000, probably in hang out there potentially. Speaker 2 00:39:24 That's my prediction. I don't know what you are. What's your prediction. Speaker 3 00:39:27 Yeah, I think, um, I think, you know, we're S we're sitting up at the $1,000 mark, or maybe $1,100 a thousand right now. And, um, and it's growing w future's show it coming down. Right. And I don't really know how close the real market runs to futures, but you have a better idea of you watch futures. Speaker 2 00:39:47 Uh, yeah. I look at futures lumber futures is, it's a very interesting thing because you can go on to any good, just go to Google and search lumber futures. And I hear this all the time. Oh, lumber price, lumber pricing is crashing. I see it. It's happening. Well, lumber field, that what they're looking at as a lumber future market and what that is, it's an index of lumber, which is SPF spruce pine fir. And it's a truckload of SPF F O B the docs in Chicago. You can actually buy when you're buying lumber futures, you're actually buying wood. You're speculating that wood is going to, you can, you can make money on it or lose money on it. That's lumber futures. It's just like the hog market, or, you know what I mean? Or any, one of the, the commodity markets that are out on the stock market today. Speaker 2 00:40:45 Now, when you talk about lumber futures that that's SPF Chicago. So that really has nothing to do with the Douglas fir that we use in the Pacific Northwest. It's kind of correlated, but it's not, you know what I'm saying? So I hear this all the time from people they say, oh, lumbers, lumbers crashing. Well, what they're looking at is the lumber futures market, which isn't even the price today, right? That's the price for material that is down the road. So, anyway, that's kind of a little bit about that. I am not a expert on that. Um, there are people that devote their lives to trading lumber futures. I would love to talk to one of them. Yeah. You know, I would love to get that information if, I mean, if you're listening to this, shoot me an email, I would love to chat about and get your thoughts on what you think is happening in the market and how that correlates to what we're doing up here in the Pacific Northwest. Speaker 3 00:41:41 Well, what we're seeing right now, and we can just talk about what has happened in January of 22, because that's where we are. That's what we've seen January is coming to an end. And here at the end of January, we've seen nothing but an increase in volume going out the door. Yeah. An increase in volume on trucks being delivered to job sites and homes being built homes, home builders are not slowing down. They are going, uh, they are going full speed ahead. And, and even at an increase in volume over 21 now notable 21 largest volume of product shipped out record year for building material suppliers all over the Pacific Northwest. For sure. And, uh, and so here we are January of 22 and we're still up and continuing to climb. So that's happening right now. Where is that going to go later in the year? Speaker 3 00:42:35 That's a good question. Cory thinks it's going to level off. I think it might, uh, I think it might level off where it's at now and maybe drop at the end of the summer. I don't know if it comes down between now and the busiest part of the building season. Maybe it drops off and then spikes back up when the building season, you know, would normally be when the sun comes out, when the days get long, all of that stuff. Um, maybe that's where it happens. Um, but probably it's going to love loss and not go through the roof. And, uh, and, and I think that home values will continue to rise. Speaker 2 00:43:09 So your prediction is it could go up, but it could come down. Speaker 3 00:43:14 Sure, sure. Okay. So here it is the big question. This is what I, this is what all of this has led up to do we, or do we not build remodel and add on to our homes in 22? This is the decision we need to make based on all of this information that we have about the cost of lumber and building materials and all that's going on right now, interest rates pending an increase home values, continuing to rise. Do you build, or do you not on the spot? Give it to me now. Speaker 2 00:43:46 Well, I'm going to quote one of my good friends and I'm sure this is a quote that he's heard from someone else. Uh, I don't know where it comes from, but it's the finance world. They say time in the market is always better than trying to time the market. And I correlate that to lumber pricing and building in that right now, interest rates are super low, super duper low. So you can go buy a house or you can go build a house right now for, with really cheap money. We don't know what that is, what's going to happen in the future. But the fact of the matter is lumber or housing prices will continue to increase. They don't see any declining housing pricing in the next several years because we're S we're still sitting on a major shortage of housing. And either, Speaker 3 00:44:42 Even if things happen, even if interest rates go up, even if lumber prices go down, whatever it is that happens, we still have tons and tons of homes that need to be built. So business is going to go on as usual through the course of this year. And I feel like my answer is absolutely. If you have a project that you've been planning, waiting to do, it is not the solution, right? Speaker 2 00:45:09 Yeah. Especially if it's for your quality of life, if you're, if you're adding onto your house and you're saying, oh, I'm gonna wait for lumber prices. I'm gonna wait for lumber prices. I'm gonna wait for lumber prices. Um, it's almost impossible to time the lumber market almost for the past 10 years. It's been the same. I mean, plus, or minus 5%, you know, nowhere did I ever imagine that it could go up 60, 70%, but it did. Um, and it's funny. I actually have an anecdotal story when right after the pandemic hit in lumber prices started to rise in 2020. One of my friends contacted me. He said, I'm going to build this shop that I quoted for him in 2019, when lump number prices were somewhat normal. I quoted him the price. It was like twenty-five thousand dollars for all the material for this big shop. And then he comes to me and says, I want to build it. I'm like, oh, don't do it. Wait, man, just wait. Cause alum, his lumber package had gone from 25 to like 32,000. And so he, he said, you know what? I don't care. Um, I got the loan, I got to do it, send me the lumber. Well, just for fun. A year later, when lumber prices hit, what they hit, I recalculated that same quote from 29 or from 2020 when he actually bought it. And it doubled again and went from 32 to over 60,000. Wow. So, you know, uh, you know, I don't know. Speaker 3 00:46:42 Well, that was an example of where acting now, uh, you know, bought him a two years, which is what he would have had to wait for the lumber to come back down, even if he had had the opportunity to do it all right. In November or December of last year, before it spiked back up again. Exactly. So really ultimately he'd be sitting there without that shop for the last two years, if he hadn't just jumped on it and did it, which is good that he did. So it's a good point. Speaker 2 00:47:08 Time in the market is better than trying to time the market. Speaker 3 00:47:12 One last thing I'll say my mom used to say to me, this a watched pot, never boils. I would want to boil water for make tea or something, and I'd be standing there looking at him like it's taking forever. She didn't say a watched pot, never boils. Here's the thing you watch the market. It'll come up and go down and come up and go down. But it will never seem like enough. It won't seem like it'll come off 10 or 20 or a hundred, 200, but it won't seem like enough just bite the bullet, do the thing. That's all the time we got. Thanks so much for tuning in. This has been another episode of your weekend warriors right here on the weekend. Warriors radio network have a great week.

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