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Rubber and Wood February 01, 2023 02:00:22 PM

Lumber Prices Set For A Surge as Homebuilding Rebounds

Paul Ploumis
ScrapMonster Author
The homebuilding business looks like it’s ticking up again after a tricky 2022. And with it investors should see lumber prices lift as well.

Lumber Prices Set For A Surge as Homebuilding Rebounds

SEATTLE (Scrap Monster): Get ready for a lumber surge.

The homebuilding business looks like it’s ticking up again after a tricky 2022. And with it investors should see lumber prices lift as well. The latter had a brutal year also.

“Lumber, we believe has made a major low,” writes Shawn Hackett, president of Hackett Financial Advisors. “The lumber market has likely made a major low and can trend substantially higher over the next year.”

Indeed, the prices of random length lumber futures shed two thirds of their value over the last 11 months.

In mid Janaury futures contracts fetched $344 per thousand board feet, down more than two thirds from $1,464 in early March last year, according to data from TradingEconomics.

A big part of the slide came as a result of the Federal Reserves war on inflation and the resulting increases in interest rates. In turn, those higher interest rate torpedoed the housing market which had already become overheated during the COVID-19 pandemic.

U.S. housing starts fell from a recent annualized rate of 1.8 million in April, down to 1.4 million in December, TradingEconomics reports.

Home construction is inextricably linked to lumber demand and prices, so aa drop in the rate of construction can generally be expected to mean a fall in lumber prices.

However, that may have come to an end.

Sentiment among homebuilders has ticked up lately meaning residential construction companies likely see more business in the coming months. The National Association of Home Builders (NAHB) Housing Market Index (HMI) rose to 35 in January from 33 in December. That increase comes after the index fell every month since December 2021.

Courtesy: www.forbes.com

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