Notes from the Forest 4-30-21 Edition

Ladies and Gentlemen:

There was a brief moment on Monday morning when hesitation crept into the lumber and panel markets. It was short-lived, not more than 60-minutes long, if that. It started when buyers looked at last week’s new historic price levels, their projected needs for May, June and early July, and wondered when the price surge might end and how they could continue to move forward with credit limits close to or completely tapped out. Then reality set in, jobsites and value-added manufacturers needs for product continues unabated and they needed to find replenishment. At the same time were calling and recalling mills and secondaries checking on shipments that are 3 – 6+ weeks behind scheduled and desperately needed. Making matters worse is the ongoing lack of trucks, empty railcars to load and rail switching crews needed to move loaded cars to transportation hubs.

The National Association of Realtors? (NAR) has reported their Pending Homes Sales Index (PHSI), which is based on signed real estate contracts, not actual closings, for existing single-family homes, condos, and co-ops, declined -10.6% in February to a reading of 110.3. An index of 100 is equal to the level of contract activity in 2001. This marks the second straight month of declines in the PHSI. The NAR notes that contract transactions fell in four major U.S. regions, with the Northeast and West Regions fall below 100.  Year-over-year contract signings declined -0.5%. On Tuesday, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, which covers all nine U.S. Census divisions, reported that home prices experienced a 12.0% annual gain in February 2021, up from 11.2% in February,2020. The 10-City Composite annual increase came in at 11.7%, up from 10.9% in the previous month. The 20-City Composite posted a 11.9% year-over-year gain, up from 11.1% in the previous month. Last Friday, the U.S. Census Bureau reported that new residential single-family home sales for March 2021 were at a SAAR of 1,021,000, according to estimates. This is 20.7% above the revised February rate of 846,000 and is 66.8% above the March 2020 estimate of 612,000. The seasonally adjusted estimates of new houses for sales at the end of March was 307,000. This represents a 3.6 months’ supply based on the current rate of sales. The median sales price of new houses sold in March 2021 was $330,800. The average sales price was $397,800.

Spruce & Stud Markets -: The inquiry and sales pace of Western and Eastern Canadian SPF Std., & Btr., and No. 2 & Btr., remains harried.  Mills started the week, again, quoting double-digits above last Friday’s levels and prices climbed higher from there; for production scheduled for late May and early June. Accelerating jobsite activity and unabated price increases had buyers combing through the mill and secondary markets looking for anything that could come close to meeting their needs and hopefully ship quickly. Overall, buyers once again came up emptied handed. However, the lucky few buyers who did find what they needed paid double and sometime triple-digits above mill historic price levels, and the seller still had to find a truck or railcar to load and their availability deteriorated further (if that is possible), during the week. Sales of low-grade remain robust. Mills started the week quoting low-grade double-digits above last Friday’s levels and prices pushed higher from there; for production scheduled for the weeks of 5/17 – 5/24+.  Stud trim sales continue to gain momentum. Demand for 9’ stud trims were particular stout. Mills started the week quoting stud trims double-digits above last week’s levels and prices pushed higher from there; for production scheduled for the weeks of 5/17 – 5/31+.

CME Lumber Futures –: The CME Lumber Future Contract for May will expire on Friday May 14th, 2021 at Noon CDT. For the past 5 days, (4/23– 4/29), CME Futures were up 4-days, Unchanged 1-day and down 0-day. CME Lumber futures have gained $ 129.80 for the week and are trading above the Midweek Cash Market $ 1385 by $ 69.30, CME $1454.30. A bit of HISTORY - One Year Ago Today, CME closed the day at $317.90.

Hem\ White Fir -: The inquiry and sales pace in the Coastal and Inland Std. & Btr. No.2 & Btr., White and Hem-Fir, remains intense. Producers started the week, again, quoting double-digits above last Friday’s levels and prices moved higher from there; for production scheduled for the week 5/24+. Demand for wider widths was extraordinary this week. Increasing jobsite activity and an anticipated strong late spring and summer building season had buyers scouring the mill and secondary markets looking for replenishment. Grabbing whatever came close to meeting their overall needs and could ship in a reasonable time frame. Industrial sector buyers in need of replenishment inventory for their facilities kept the low-grade markets jumping all week. Mills started the week quoting low-grade double-digits above last Friday’s levels and price pushed higher from there; for production scheduled for the weeks of 5/17 – 5/24. Demand for stud trims is so strong that it is being reported that some producers have resorted to allocating production volumes and that includes key customers. Mills started the week quoting double-digits above last Friday’s levels and prices bounded higher from there; for production scheduled for the weeks of 5/24 – 5/31+.

Green Doug Fir -: The inquiry and sales pace of Green Douglas Fir Std. & Btr., & No. 2 & Btr., remains robust. Mills started the week quoting double-digits above last Friday’s levels and prices trekked higher from there; for production scheduled for the weeks of 5/24 – 6/3+. With jobsite activity gaining additional momentum buyers searched through the market looking for replenishment. With many buyers saying that availability and shipment times are far more important than cost. Kiln dried buyers who had been attracted to the Green Doug Fir market due to the lower costs, have been somewhat put off by the suddenly expanding Green Fir mill production schedules. Demand for low-grade continues to intensify. Mills started the week quoting low-grade at or above last Friday’s levels and prices moved higher from there; for production scheduled for the week of 5/17+. Demand for Green Doug Fir stud trim strengthened further over the course of the week. Mills started the week quoting double-digits above last Friday’s levels and prices climbed higher from there; for production scheduled for the weeks of 5/17 – 5/24.

Cedar Lumber -:  The inquiry and sales pace of Western Red Cedar (WRC) boards, fencing, dimension, radius edge decking, siding, pattern stock and timbers remains frenzied. It was another week where limited mill production could not keep up with unabated demand. Anxious buyers spent another week checking with mills about recently placed orders and asking if they could somehow get additional materials on order. In most instances mills had little to say about previously placed orders and said “NO” about additional purchases. Mills started the week, as a price guide only, quoting above last Friday’s levels but the upward price push was not quite as stout this week as in the past months. Buyers looking at alternative products, such as imported Sugi for fencing items and Alaskan Yellow Cedar for boards and decking noted that they too were now in tight supply and shipping late. Mills continue to report buyers’ unrelenting demand for boards and dimension lumber, small squares and timbers, siding, fencing items and decking. It is being reported that large box store buyers have begun making the point to WRC mills that empty bins \ shelves provide the company with no revenue, and that those bins needed to be filled or alternative products to fill those bins will be found and could potentially be a permanent replacement. 

Shake & Shingles -: The inquiry and sales pace of Western Red Cedar (WRC) Shake, and Shingles and Eastern White Shingles (EWS) remains little changed from the past several months. Mills started the week quoting at or above last Friday’s levels, as demand continues to overpower limited supply. Producers continue to report that sourcing logs is a constant struggle and the upcoming Freshet on the Frasier River will most certainly increase log and transportation costs. Also impeding production is another spike in COVID -19, which is greatly reducing the available labor pool. Buyers pressed the mill(s) for additional details about their delayed shipments and grew more frustrated with the lack of specific details coming from the mill. Producers, however, quickly countered that transportation issues, which are further delaying shipments, are ‘obviously beyond their control’.

Southern Pine Lumber -:  The inquiry and sales pace of Southern Pine No.1 & No.2-dimensional lumber remains dynamic. Growing demand from jobsites, distributors, and treaters helped to fuel the markets activity levels to new heights this week. Producers started the week quoting double-digits above last Friday’s levels and prices trekked higher from there; for production scheduled for the week of 5/17+. High grade buyers with growing sales, and shrinking on ground inventories, worked diligently to secure product needed to keep production on track. Low-grade sales remain strong. Mills started the week quoting low-grade above last week’s levels and prices traded higher from there; for production scheduled for the week of 5/17+. Stud trim sales were able to build on last week’s uptick. Mills started the week quoting stud trims above last Friday’s levels and prices pushed moderately higher from there for production scheduled for the week of 5/17+. Sales of small squares and timbers continues to grow thanks to increasing demand from pressure treaters and pro dealers. Mills started the week quoting 4x4 – 4x6 – 6x6 above last Friday’s levels and prices moved higher from there; for production scheduled for the week of 5/17+. Demand for 5/4 x 6 Standard and Premium Radius Edge Decking also experienced a strong increase in demand this week. Mills started the week quoting R.E.D. above last Friday’s levels and prices climbed higher from there; for production scheduled for the week of 5/17+. A continuing lack of available trucks, empty railcars and switching crews have contributed to buyers’ growing anxiety and frustration levels. It is also resulting in delayed shipments throughout the Southern Pine markets.  

Pressure Treated -:  The inquiry and sales pace of pressure treated lumber, panels and specialty items continues to gain momentum. From large box stores and pro dealers, to smaller independent dealers’ strong sales of treated products has necessitated frequent replenishment, again, this week. The continuing surge in demand has pressure treaters reporting that on several key items they now have extended production schedules, some in the 2 – 4 weeks range. A shortage of trucks and railcars has slowed inbound brite feedstock, creating a production pinch-point at several facilities. The same lack of available trucks is slowing outbound shipments to buyers in need of replenishment. As a result, several pro dealers have become proactive and are trying to keep 3 – 4 weeks of product on hand. Large box retailers are reporting steady sales but noted they are not as great as this time last year.

OSB & Veneer Panels Overview –:  The inquiry and sales pace of OSB and plywood panels experienced a very short-lived hesitation early in the week. Several buyers started the week wanting to recalculate their anticipated panel needs for late May through mid to late June. This as current price levels, extended mill production schedules, late shipments and credit limit issues had them well outside of their purchasing comfort zone. However, for every buyer wanting to recalculate, there were 2 – 3 that were ready to snap up anything mills were willing to offer and price was usually the least important part of the transaction. By mid-morning on Monday the pace was back to or beyond the chaotic pace of the last several weeks and prices moved higher, as production schedules moved into mid to late June through early August. Production and transportation issues remain ongoing. These issues are delaying shipments an additional 2 – 5+ weeks, much to buyers’, in desperate need of replenishments, dismay.

OSB -: The demand, inquiry and sales pace of OSB remains unrelenting. Mills started the week quoting unevenly above last Friday’s levels and price edged higher from there; for production scheduled the weeks of 5/24 – 6/7+. Demand for underlayment is particularly strong. Production and transportation issues persist, and if possible, seemed to deteriorated even further over the course of the week. In turn, adding additional weeks onto already delayed shipments. Buyers in need of replenishment to meet growing jobsite demand spent the week searching through the mill and secondary markets looking for open market panels that could ship quickly. A few did get lucky and paid high double and triple digits premiums to reported mill levels for that material. However, a majority of those buyers once again came up empty handed.

Southern Pine Panels -: The inquiry and sales pace of the Southern Pine Rated Sheathing remains super charged. As in the previous several months, mill started the week with little, to no open market panels available. Instead using what limited extra production they might have to meet additional contract obligations. Mills started the week quoting double-digits above last Friday’s levels and prices climbed higher from there; for production scheduled for the weeks of 5/24 – 5/31+. With demand on the rise, buyers chased after late shipments and searched through the mill and secondary markets looking for anything that could possibly ship faster. Should anything be located it was being offered at a significant premium to mill reported levels. Demand for Mill Cert. remains red hot. Producers started the week quoting Mill Cert. above last Friday’s levels; for production scheduled for the week of 5/24+. The sales of underlayment, sanded, siding, concrete form and other specialty panels remain strong. Producers started the week quoting at or above last Friday’s levels; for production scheduled for the week 5/24+.

Western Fir Panels -: The inquiry and sales pace of Western Fir Rated Sheathing remains energized. Many mills started the week off market, having no open market panels available again this week. The producers that were on market started the week quoting double-digits above last Friday’s historic levels, and prices pushed higher from there; for production scheduled anywhere from early June through early August. Agricultural bin manufacturing buyers were active in the marketplace and some volume purchases have been reported, but not confirmed. With jobsite activity continuing to gain momentum buyers chased after late shipments from both mills and secondaries and pleaded for specifics on when those delayed shipments might be outbound. Producers continue to report that they are dealing with ongoing operational production issues. While at the same time reminding buyers that transportation issues remain well beyond their control but are causing further shipment delays. Mill Cert. sales continue at their record-breaking pace. Mills started the week quoting Mill Cert. above last Friday’s reported levels and prices moved higher from there; for production scheduled for the weeks of 5/24 – 5/31+. Canadian buyers continue to purchase CC panels in the U.S. domestic markets. Mills started the week quoting CC panels above last Friday’s elevated levels and prices climbed higher from there; for production scheduled for the week of 5/31+. The sales of value-added panels, underlayment, sanded, siding, concrete form and other specialty panels remain active. Mills started the week quoting at or above last Friday’s levels and prices pushed higher from there; for production scheduled for the week of 5/24+.

Food for Thought-:   I read with great interest and some amusement; an article recently posted in a real estate company’s market newsletter about the growing number of existing homes being listed in March. The report says that there was a 30% increase in new listing from February to March of this year. Wow, that is great news! Especially for a housing market currently starved for availability. According to the article more homeowners are wanting to take advantage of the record-high prices for existing houses and are choosing to list their homes for sale. The article further suggests that the current housing markets tight inventory woes might have finally found a solution with these additional listings. They indicate that with additional houses for sale that some of the bidding war pressures might also begin to dissipate. 

All of this sounds wonderful. There is light at the end of the tunnel. Housing inventory relief is on the way. That is until you ask yourself one other important question. Where are the people who are putting their homes up for sale going to live? Let me assume that for the majority of sellers living in their car, and RV or a tiny house is probably not a viable solution. Many of these homeowners are from the baby boomer generation and are now empty nesters. They don’t need 4 – 5 bedroom and 2? - 4 bathrooms and the upkeep that comes with 2,500 – 4,000 square foot or larger home. They certainly don’t want to deal with lawn maintenance or working on the exterior work of their homes. But many of them haven’t lived in an apartment, townhouse or condo in years, if not decades. They are used to their privacy, having a place for all of their treasures and memories and doing what they want in their own homes, without someone above, below or on either side of them.

So, exactly where are they going to live? Well, in a new or existing single-family home that is smaller, more manageable in size and more than likely in an HOA community that will have the social and location amenities they desire. But without the need to worry about the chores they no longer wish to perform. However, there is an acute availability shortage of these homes according to real estate experts. So, while their house might sell quickly and at a price, they could not have possibly dreamed of 1 – 2 years ago, if ever. The issue remains, where will they live, while they wait for their new home to be built, or for a unit in their desired community becomes available? How long will they have to stay in temporary housing or with other family members is just beginning. One part of the housing market may begin to be less constricted, but another is about to experience a major shortage.