Lumber crash leads to 'blowout' sales as prices crater
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Except... many builders will find some other reason/excuse where prices are high to keep prices high. We were looking at building a house - talked to builder last November and... looking at $470-$480k range (ballpark estimate). Lumber was going higher, but we'd reduced the house plan size. Lumber kept going up... and up... Then... no parts were available (IIRC certain trusses were unavailable for months, that's just one that stuck out).
We regrouped a bit later. House was now going to be min $620k, but... no guarantee it would be $650k or $700k. Builder has been working on spec homes in the $700k-$900k range last few months, whereas exact same size houses 1 block away they were building and selling in the mid-$400s 14 months ago.
Before we cancelled the project, we asked why we couldn't build something smaller and target a time in a few months, as lumber was coming way down to where it was 18 months ago. "Everything else has skyrocketed..." which... I know things have gone up some in the last 18 months, but I think there's simply some "get high prices while you can".
When talking to some home finance folks, they're all saying "watch out for HELOCs in 18-24 months - people will be clamoring for HELOCs as they won't be able to sell these $700k houses they're buying, because they won't have appreciated at all, and the homeowners will be trapped".
There may be 'blowout' prices on lumber itself, but around here I'm not seeing any 'blowout' prices on new construction in the short term.
This also means the housing prices will probably continue to go up as well.
If someone actually finished working on an inflation database website I would love to enter data for them. I'm seeing spikes across everything I buy in the last 2 months. I feel like the true inflation for food itself is at least 33% in the last 5 months.
But who knows, maybe the economy will just keep booming forever
The only thing that happens is soon as the market gets skittish, the fed prints money. They seem to be so scared of a recession, or maybe, the poets that be are so leveraged up themselves, that they will do whatever it takes to prevent a crash.
My thought is, don’t be so leveraged that you’re the first to collapse when things go down. If things continue collapsing, the fed will step in and fix everybody still standing.
There was a question why people want to move to Munich even though it is the most expensive city in germany.
Answer : because it is a city! Disco, cinema, stuff to do in your free time.
And more and more people are willing to sacrifice 2/3 (or more) of their income just to live in the city. (also part of the first question)
So, i dont see rent going down anytime soon.
And if there will be a recession, even more people are willing to sacrifice everything, just to move to the city.
Exactly this. Somewhere along the lines in the past decade or so, it became completely normal to lend people 10x their income to buy a home, when historically that figure was 3.5x.
I mean basically where is there yield? Crypto + NFTs (yuck to the latter), real estate and equities. Even just running correlation analysis on these various assets over the last 20 years showed that crypto was super underpriced (despite only 12/13 year track record) while real estate is tremendously overvalued and equities were the only thing to react in a reasonable way to both (1) the initial realization covid was serious and (2) the Fed stepping in with 2 novel revolvers for SMB and for corporate credit. Treasury even threw in a bit into the bowl and performed stimulus. The last 1.5 years likely minted more "wealth" than in the previous 100 years combined (hand waving a bit) - a framework was laid to make much more money than what you put in provided you were looking at what was to come based on what was spoken.
care to elaborate?
When people talk more and more about how lower taxes on the rich boost investment you already know that private investment is dead and won't recover no matter what you do.
You do!
Most people, when they get a mortgage, they're going deep into debt. You have about that much in liquid assets. You can definitely afford it.
Land depends on where you go, no comment there, but keeping up payment on your current place during construction just means you end up paying for 21 years of housing on a 20 year mortgage, or 31 years of housing on a 30 year mortgage, not a big deal.
What dropping interest rates does is not prop up the price of housing, it's increasing the resale value of the housing you already pay for.
This sounds familiar…
> nobody around to tell me what to do
Presumably you wouldn't both mention her participation and dismiss her presence in the same breath...
Not sure what you're trying to say about this reflecting on me, it's just an amusing contradiction. I think it reflects well on my sense of humor.
Why are you failing so hard at seeing your choice of wording through a humorous lens?
As written, your statement reads like "there's nobody around, and as a result, nobody is here to tell me what to do."
In the same breath you mention there being someone else around, but apparently your wife doesn't count as somebody.
It's funny, and judging from the +27 of my comment illustrating the amusing self-contradiction, I'm not alone in finding the humor.
There aren't that many people above you, but 1% of the US population is still millions, and they have an outsized influence and visibility.
Property also suffers from "pigeonhole" effects; a few foreign millionaires parking their money in empty properties at the top end causes everyone to move along one.
I make 5x the median wage in my county and my county has the second highest wage in the US.
I see all these $M houses being sold left and right and I'd never feel comfortable buying a $M plus house. What gives?
Prices seem silly to me here too (Australia) but a lot of it seems to be a combination of the perception that house prices just always go up, so you have to "get on the ladder" as they say and trade your way along. Each step doesn't seem to be a huge investment in itself. If you don't hop on, then you get left behind.
But tax law here also makes loss-making investment properties attractive to people, and borrowing against equity is another thing. Interest-only loans (as interest is a deductible investment expense), plus other expenses (all the better if it's in a nice holiday destination so flights and hotels to "inspect the property" are deductible), resulting in a minor loss on rent, which is offset against your primary salary and other investments.
Negative gearing like this allows people to basically zero out a house on the balance sheet and move on to buying another. Let it appreciate for a few years and you're ahead. Be a major voting base and politicians won't dare ruin your gravy train.
Reality will disagree at some point.
If you don't have significant capital in investments, you're getting hosed.
If prices on an investment rise more than inflation 90% of the time why wouldn't you buy it?
https://lginform.local.gov.uk/reports/lgastandard?mod-metric...
According to the estimate-o-matic tools, the house I'm in is worth about 425k. There's basicaly nowhere in this market I could take 425k and get a house meaningfully bigger or better. Not in the new-developed neighbourhoods where the maps say "eventually a grocery store is planned, but until then it's a 10km drive", not in old neighbourhoods where it was built in the 70s and the floorplans top out at 1500 square feet.
I've been trying to sell my family on the Rust Belt, but so far no dice.
Napkin math suggests that it’s a reasonable payment for those >=$170k annual income, which is very common in software in the USA.
Assuming taxes and insurance correspond with a % of home value, a 1 million mortgage would be about $4,800 a month.
Or about $4,000 a month if talking about a $1 million dollar house with 80% financed.
There are those who sold at a higher price and got spring-boarded into a higher priced house but these are the exceptions.
In Australia, we had a royal comission into banking a few years ago, and the outcome was much tighter rules on lending, equity from assets, etc. We also don't allow people to invest in their own or family property from their superannuation (retirement fund). Yet our market has grown and grown, rising 17% or so in the last 12 months and almost 7% this quarter.
Yes we have a very low interest rate currently, however the median wage to house price gap is growing bigger daily. Yet the demand still far outpaces supply.
You do need to start at 20% capitalization though, which at current prices means they need to own assets already (market risk), or have bonkers amounts of currency sitting around (inflation risk). I understand the FOMO some people must have.
I wonder if ultimately there is a cascade happening, where increased valuations lead previous owners to either take new mortgages, or sell their old house, and pay more for a new one. Which creates a cycle of ever increasing prices? I've never read anything though whether such an effect exists.
A quick google suggests that a £100K income is in the top 3% in this country, and top 1% is about £176K.
Sure, there's a few hundred football players averaging maybe £3M a year who can thus buy maybe a £15M palace, but if you go on a property site they could each buy one and still have pages and pages of places left on the market.
Similarly there's a bunch of finance/media/law people who've climbed to the top of the greasy pole and could afford a £3M house. But how many can we really be talking about? A few thousand? Ten thousand? Are there really that many MDs and law partners in London?
Average income is still well under 6 figures in this country, and I know a load of doctors who are only just scraping into that category in their 30s. So if you're just scraping into 6 figs as a highly trained and rare specialist, how can there be so many houses that cost 7 figures?
Even if you add parental help, how many people who are splitting inheritance between 2/3 kids is it actually going to help?
I suspect a lot of people have actually drawn on all reserves: found a high income partner, got help from the parents, got a max leveraged mortgage, and possibly some have lied about their income.
I get the feeling it will end badly.
The sort of person who could afford a nice house 3+ decades ago and spent the intervening years living in London isn't likely to move to somewhere more rural just because they can realise an investment.
But in London these houses do sell, normally very quickly (and bullshit apartments in shiny new blocks that are in same price bracket I guess same, generally they do seem to sell, but I assume that's just parking money for tax purposes so not quite same thing).
Agreed.
As to the question of who has that kind of money: you're talking about income from employment, not assets. Maybe there are a lot of people with assets that put them in reach of £2-3M homes. And of course there are foreigners who don't work in the U.K., like Saudis, Russians, and Chinese.
Yes, it will. When people get shoved into tiny homes with their parents and children and have zero hope for any future on their own, you will see the people say enough is enough. They will march. They will protest. They will vote. They will clean house.
If brexit didn't end this, then it's probably a pretty stable system. It sucks for locals, but there are far worse places to over extend yourself on housing than in London.
Am I jumping to make this particular financial decision? Nah. But it’s not wildly out of reach.
The housing market has cooled and you can get some good deals now, but in 60months we’ll back in a growth market. There simply isn’t enough supply to keep up with demand. People keep having kids, cities keep limiting housing density, suburbs can only sprawl so far.
It’s not really about lumber prices. It’s about finding the highest construction prices that the market will bear. Can’t find the limit until you push so hard that some customers start dropping out.
I wonder if there's a space for business for an intermediary who would take on multiple builders for your single home, wait for them to do their price discovery dance, and then drop every one of them except for the cheapest one.
Disrupting schedules isn't free for customers either.
No, I meant a legitimate intermediary. If builders get to overcommit and then cancel on their customers, why shouldn't a customer be able to do it too? The intermediary would just offer a service of doing that for you - booking multiple companies for your construction project, waiting until the last second, and cancelling all but one.
The developers aren't held to a timeline in the contract. They just stall forever, working on the ones willing to pay the most. If they ever ran out of better customers, they would eventually get around to the cheaper customers.
They've done something unethical, but they haven't broken the contract.
Why couldn't they? I'd imagine the only problem is it is an ineffectual strategy for a client. There is a lot of money involved, people are already doing everything they can think of to get the lowest price.
It is absolutely a dick move to lead someone on, but in the grand scheme of things a minor problem. Construction is a mess of problems.
Having worked with subcontractors a race to the bottom is not a good plan. IMHO subcontractors cost is directly proportional to experience. Simple unseen things will get missed eg: wrong type of drywall in the bathroom.
Typically they don't even care about customers dropping out. They just work down their list from the highest quotes to the lowest. The customers who were quoted a low price simply never get their job started unless work dries up for the contractor.
If 14 months ago, they were building them for $450,000, I'd wait.
I'd shop around for another contractor too. A young guy starting out, might save you a lot. (There's no way to verify he knows what he's doing though.)
If you are some what handy, it's not that difficult to owner build your own house. That is if you get the blueprints past the town's council. Getting approvals is the tough part.
If you get all the town, county, approvals, and have a very buildable lot (flat, no flooding, etc.). Once the foundation is poured, it step by step, and done.
(If you decide to build yourself, don't make any changes. Don't build a custom house either. A simple home will make the process go smoothly. Realize too, the General Contractor just hires licensed subs, and takes a healthy cut off your nut. Then again--if you have never done construction yourself, disregard everything I said. I just pictured a typical computer developer in a wet lot, with an unhappy wife. Muttering to Google translate to communicate with the unlicensed, unbonded, subcontractor.)
(I'll see myself out)
May you rest in peace.
I'm guessing they just left the industry to do something less mentally damaging than web development - perhaps started a spider farm or something.
Block is generally level, but if they pour it, they don't get very close
That said, I didn't follow through yet and haven't built anything myself. Even if you do use a GC it's still a great read.
https://www.buildwise.org/review-what-your-contractor-cant-t...
Edit: I did get as far as talking to my go-to mortgage banker about construction financing, and learned that self-GC'd projects are pretty much not finance-able through traditional paths. Many of these projects end up unfinished, with the GC-owner running out of money. And with no certificate of occupancy they can't be easily sold or refinanced.
Definitely communication, good diagrams, developing a good rappour with the contractor and not being overly tight or strict with them otherwise you can build resentment. For example, don't withhold all of their expected money because of a single piece of dodgy drywall, give them most or all of the money and make sure they make-good first thing next week.
Plan on hiring a plumber, electrician, and HVAC specialist. Probably another 3-6 months to figure out all the paperwork.
Each mock-up slightly bigger than the last, until one day...
The playlist currently has 126 videos. It's here: https://www.youtube.com/watch?v=AGCC-_Cuhhw&list=PLRZePj70B4...
My impression after watching most of it: It might be "easy" to build your own house once you are an experienced contractor. If that's not you, then it's going to be a second job, or even a third job (building and learning). You will need to hire and manage subcontractors - the kind of job the contractor does. If you like that sort of thing and that's how you want to spend your time, go for it. I personally think that my time would be better spent finding a better job in tech and getting a promotion, so I can hire a professional to do all that.
I think he only really goes over the top with concrete.
His finish work is finicky. I'm thinking of those craftsman columns on the spec house. Most people would just caulk and be happy with it.
Neither modern, nor practical, but it has excellent drawings on how to build everything in a house out of wood and nails.
Decades of FPL.gov data on lumber species pretty much agree with his assessments from the 19th century as well.
Then build a detached garage, get experience with pouring a slab, attaching walls to a foundation, trusses, more practice with exterior doors and windows, insulation, wiring. If you’re really feeling confident you could put a half bath in it to practice plumbing.
You should be ready for the house at this point. You’ll either love it or hate it so much you’ll just hire someone to do it for you. Having a shed and garage on site is a big plus for building a house since it gives you a warm dry place to work and store your tools. I’ve known people who built their garage first so they could live out of it while building the house, only works if you’re a bachelor though.
Part of learning is learning from mistakes -- you learn which parts of the "correct" way to do something are essential, and you learn why the correct way is correct, when the incorrect way fails. Ideally, that's the part you want to outsource as much as possible; if you were working with an experienced builder, they'd be correcting you constantly to keep the mistakes from affecting the build, but hopefully YouTube can at least show you the big "don't"s.
Pro-tip: most fasteners (nails and screws) are not "structural"; they hold wood in place, but they don't support weight. That's why eg windows are framed the way they are, instead of just nailing a 2x4 between two others; it allows each piece of wood to be supported directly by another.
Very good tip. So very often I see decks (for example) built improperly, relying on non structural fasteners to hold it all together. This kind of stuff tends to fail in a number of years. I've seen a few collapsed porch roofs for the same reasons. Make sure your fasteners are rated for how they're used. A general rule of thumb is that wood sits on wood, not attached to the side.
In general you want "fixing old houses" videos that focus more on the tear down and guts and less on the "look how pretty my house looks at the end" before & afters.
Here's one about corners some contractors often cut: 10 DUMB (and Common) Building Practices https://www.youtube.com/watch?v=LuUxUt6MwIU
Here's another about his regrets about how he remodeled his own house: https://www.youtube.com/watch?v=4HYROAFgp7Y
https://success.cabrillo.edu/Student/Courses/Search?subjects...
I have heard many horror stories of people who had houses built and the builders made terrible mistakes. The person having the house built had to micromanage them and kept finding bad mistakes, like "forgetting" to put insulation in walls before the drywall, putting a window in the wrong spot, or putting crawlspace pillar supports in the wrong area.
I feel like right now the most reliable way to make sure my house gets built right is live nearby and check on it every day. Is there a better way?
I have a friend who plans on building a container house, and who is convinced that it will be much cheaper than a traditional house. Note that we live in Europe, where homes are build from stone and concrete, not wood and cardboard.
EDIT: There's a caveat here. Because containers are trivially transportable, you have lots of options when it comes to assembling off-site that could be kind of nice. For instance, if you were a carpenter with a nice workshop, and wanted to fit out your house in your shop instead of in a muddy building site, it's kind of cool that you can do all the fitting, then put the parts on a truck. This would also be cheaper. If I was self-building, this would be a big consideration for me, because it's not actually very nice working in a building site, and it's not particularly efficient either.
I've no idea what permissions you'd need for a container house.
As I recall, the biggest challenge was cutting out the sides while maintaining structural integrity. They ended up having to do a lot of complicated stuff to make it structurally sound, nearly negating the benefits of using containers in the first place.
But it looks great. I think the episode is on Netflix. Here [1] is an article with photos and a ten-minute clip from the episode.
[1] https://metalbuildinghomes.org/grand-designs-shipping-contai...
I remember when this became popular and also remember plenty of articles deriding the fact by architects and engineers both agreeing this was an incredibly poor idea for a number of reasons.
You'd be a thousand times better off just hiring an architect and doing a prefab or modular home.
you got it.
> Is there a better way?
no.
The other problem in the UK is there is no formal registry for a "builder" as opposed to plumbers, electricians and even window fitters that have to be registered.
There is definitely a need for good people skills (passive aggressive doesn't work on the building site) and being clear up-front. You also need to try and avoid over-reliance on one person/company, you don't want everything stopping because the electrician cancelled on you.
In the UK, electricians do not have to be registered.
But I don’t know for sure.
It is quite a racket in some towns, as some electricians will have an “expedited” relationship with the town’s inspectors, so you basically have to hire certain electricians if you want your project to move along smoothly. The electrician will come by and walk through for 5 min glancing here and there and sign the paper for $10k or $20k or $30k depending on size of the project.
There's a separate exam for solar installs. I took and passed that, but given that it is open book (you get the NEC book) and covers "only 3 sections of the NEC"), it was suprisingly hard.
Where I live, a homeowner is allowed to do their own electrical work. Must be permitted and inspected, though. When I've done big projects in the past, I've asked the inspector out at the start to ask for their advice -- gotten really good info that way.
Even that has been outlawed sadly. You can't fit your own fuse board and get an electrician to just sign off on it anymore - there might be people who still do it and give you a document saying they've done the installation, but in general it's not a thing anymore.
Of course absolutely nothing stops you from doing it anyway, then having a general electrical inspection done. If anyone asks just say it was like that when you bought the house already.
You don't even need good people skills, just being aggressive works, but you do have to be clear up-front: "stop right now, I am sure you fucked up this part: either prove to me I am wrong or redo it ASAP or I am not paying you for this" works much better than rolling out a list of complaints when they present the final bill.
Of course they say that. What would you think if they said the opposite?
Not the same guy, but I might start to trust them more
Going every day is how you check the GCs work. A good GC should probably tell you the days where it's more important for you to come and check and what you should be looking for, but being there to notice things and ask questions helps keep things on track.
That way, if an issue turned up later, he could prove by showing the pics that they forgot to do something or did it in the wrong way.
Contractors try to look after each other. Most know enough about other trades to stop and say "this isn't right, are you sure you want me to continue" if someone else did something wrong. But everyone once in a while this fails.
He's a guy who worked for USPS and wanted to build a metal building on an undeveloped lot so he bought a backhoe, then an excavator, then a dumptruck, then a crane, etc. He buys all his equipment used and maintains it all himself. He quit USPS a long time ago and does work for hire with his equipment now that he has it all.
1. My lifestyle is such that I only get an hour or two here and there to progress my projects. It takes probably 2h to go fetch a machine and unload it, so zero work would get done.
2. Around here rental machine availability is very inconsistent: it's quite likely that whatever machine you want is not available when you need it.
3. I've found that it's beneficial to have various attachments and accessories that most rental places don't carry such as a ditching bucket, pallet forks, brush mower.
4. I need to do snow removal in winter and although not necessary, heavy equipment comes in handy for that.
5. Other random things that arise when you own property: lift a fallen tree off your vehicle; unload palletized deliveries from semi truck, etc.
6. Typically the value of machines doesn't drop much, so if you have the cash available, buying machines with the expectation of selling them some time in the future means overall low TCO.
That said, I'd rent when I need a machine I would only use for one job.
That's part of why. Also some rent seeking in there. We used to have weak building codes, more buildings fell down.
We soon learned that a simple timber frame with paneling on both sides meant the whole house was a collection of chimneys, which meant any fire would very quickly overwhelm the entire house.
So we came up with some building codes which said that the timber frame needed more side-trusses to act as firebreaks.
Note that this applies mostly to single and duplex home owners.
I'd agree with you that there is a lot of unnecessary and unproductive bureaucracy in the process, but I do not mind the status quo.
Houses are complicated systems that need to control heat, moisture, water, and power while removing waste. This whole thing needs to be structurally sound while burning slowly enough so that you have time to react and escape in case of a fire. These are the most important investments most people ever make, and for the most part we are all served the cheapest legally permissible house that consumes as much space as possible.
Yep, we should leave that to the market. You happen to live in a building that collapses, well, then you can have The Choice(TM) to never inhabit a building made by the same company again (if you're lucky). Eventually they'll be driven out of the market, unless people choose to risk it after assessing all available information, in which case there's nothing we can really do about it.
Have you heard of the TV programme Grand Designs? It's just this over and over again. Sometimes the wife is pregnant, sometimes they're living in a caravan on site. https://www.channel4.com/programmes/grand-designs
They're not trying to build anything as simple as a house, either, the "grand" part implies some mad architectural vision that will become unliveable within months while also looking completely horrendous in its rural setting.
Take a shot every time Kevin says "bespoke"
The mid project reveal is always "surprise we are pregnant". It brings me great added joy when they are building a 'dream' 3 bedroom house and it is the 3rd kid that they are pregnant with.
Since my boys are teenagers now, I spent the pandemic building a rather nice lofted bed setup out of baltic birch ply for their shared room. It gives them their own personal space (had them help design use cases) and more privacy than most kids in the world have. One is autistic and hypersensitive to the others habits, but I was able to mitigate 95% of that with visual blocking, acoustic materials, and a HomePod mini for pink noise.
You make do with what you have. Some of son’s friends live in 5-10M houses, some live in trailers, some in apartments. I think they all understand that, while they probably want more, they’re lucky to have this.
Grand Designs is as much a monument to human achievement as it is failure!
[1] https://youtube.com/watch?v=3AlsMEiAMvM [2] https://youtube.com/watch?v=CBpRLzbrCa8
The most dramatic one that I noted was a very contemporary museum looking home. The owner stressed how long they had spent planning it, and how you only get once chance, and it would be his dream home. He completes the house in the Surrey woods (it was beautiful, to be sure). Sells within a year and buys property on the Costa del Sol in Spain.
So you have two choices; struggle and be miserable for as long as you can before it all falls apart (but in your dream home) or sell up for financial safety and compromise on the location.
Reminds me of my grandpa’s house kinda. Well, he’s from Southern Europe, so he built a brick box amongst a bunch of mid century/post WWII vinyl siding houses. Nothing wrong with it, but sticks out. Sure is solid though. And a cube is a good use of materials to maximize inside space to perimeter ratio.
Fortunately, my wife isn’t pregnant… I don’t think.
I guess my point is, if you're interested in DIY it's ... doable, YouTube can be a great help depending on your region. I'm an ISTP in the Myer-Briggs scale and don't get bored digging into little details as I assume many people on this site. 3 years in no failures in anything I've did, people who hired regularly posted cracked corners, even ceilings in the local facebook group.
(Contact info in my profile if you don’t want to post it publicly)
I don't know if it's the same guy, but I watched videos of a guy laying aerated concrete blocks himself and it's much more work: you need a good supplier of blocks with good dimenions, you still have to rasp down and sand down the tops of each row so they form a perfectly horizontal plane for the next row or the glue won't catch, door and window gaps are tricky and upper floors are even trickier if you want to use aerated concrete for the floor/ceiling.
Expertise required is getting the corners up precisely and being able to use a laser level and a string. You don't make ceilings/floors from these, the best option for multi-story house would be to have the floors done from a pre-fabricated concrete blocks which a crane would put on your walls https://baltparma.lt/39-large_default/perdangos-plokstes-pk...., this will give very stable floor. On the other hand, in US there's lots of framing expertise as you're saying and the options I've laid out are probably not as accessible.
Great material and a real example of true craftsmanship. Highly recommended!
I did this for my new house that was being built before, during, and after the peak of the pandemic. I wouldn't do it again. We're moved in now and we find small mistakes all the time that an experienced contractor would have easily spotted during construction. It makes me wonder what we can't see. Oh and it's impossible to get the subs back out to fix the problems because they have all their money at this point.
note: i got a job on a framing crew so i could learn to build my own house.
Just having someone will keep the GC (and usually the subs) honest most of the time. And it's super valuable when you have someone knowledgeable to go to bat for you if needed.
I recently did a remodel with a well regarded GC in my area, but still had an outside person to inspect for me. Saved me a lot of time/headaches, and probably only spent a few thousand extra
Some close relatives bought a plot in a newly developed area, and tried to find a contractor to build their home. After listening to others in the area, it was pretty clear there was a couple of good, reputable ones and one avoid-at-all-costs.
So they went with one of the reputable ones. The guy decides at some point to have a look and see how it's going, and finds a somewhat confused-looking 17 year old trying to pour the basement floor/deck on his own.
Guy asks wtf he's doing there. Turns out he's the son of the guy running the avoid-at-all-costs contractor, and this was the first time the kid had done this kind of thing. His dad had told him to go and fix this, so being an obedient son he gave it his best...
Of course the reputable company had hired the avoid-at-all-costs company to do the job since they were too busy for some reason...
Stick to buying spec houses. They will always be better than a custom home because people get to examine the house before they agree to buy it. Whole world changes when you are under contract for a build/remodel.
I also got to visit the site every day and take pictures, which is really nice to have. Especially the day before they did drywall, I went nuts with pictures and now I can tell you exactly what the inside of every single wall looks like, what the electrical looks like, the plumbing, conduit, smurf tubes, etc.
Also, if you are nice and polite, you can talk directly to the subcontractors in some cases and get even more customization at a great price. E.g. the electrical guy offered to run cat5 throughout the house for a few hundred bucks. He couldn't terminate it, because he's not licensed for low voltage, but he could run the wire itself and leave it coiled up in a single gang box in every room. The builder didn't think to offer that, but having a chat with the electrician when he was on site gave us that option.
I figure this is the brick & mortar equivalent of an exit scam, or a tech startup's "incredible journey". Build up lots of good will over several years and then blow it all as you collect enough money to retire and never deal with people again.
I would be livid and consulting lawyers if I was exposed to this brazen bait and switch by so called “reputable” company.
I'm not sure what you have in mind here, but my brother did an "owner build" in the true sense of the word and sunk every nail into every piece of wood, every pipe, every wire, every window, floor, staircase, insulation, lighting, built all the cabinets, everything. That was 8 years of his life. Two of those years he literally quit his job and worked on it full time.
Caution, it is easy to seriously underestimate how much work it is to build a house. It could stretch on for years. Not to mention the pain in the ass that is bad weather, the logistics of sourcing and moving all the materials, plans, permits, etc.
But I agree: It’s easy to greatly underestimate the amount of work that goes into a house. Contractors will have entire crews, all of the equipment they need, and most importantly they have years of experience to know how to do something quickly and in a way that will pass inspection.
A DIYer must first learn each step before doing it, which can take as much or more time than the task itself in many cases.
I used to work at a bike shop and thought it would be easy to build a bike from the ground up. Easy. Get a frame, fork set, and some other parts. Easy, right? I had no idea the amount of small parts one needs, including all the other minor stuff you have to buy like brake lines, headset, etc. Instead of a few week process, it became a few month process because I had to keep buying all these things I had forgotten about and didn't know I needed.
Now scale that up a house. I can't imagine the amount of things one could easily forget about on a project that scale and not realize until it was too late.
And yes, my grandparents in Europe also build their house like you say. Not being involved in the process (nor other family that I know of), I’m afraid that such knowledge isn’t being passed down.
I don’t get why simplicity isn’t more of a thing. Complexity is just asking for extra maintenance and the very high likelihood of something being done wrong.
This is what's wrong with America.
but without any experience (which is ~99% of us, even if handy), it is difficult to know how to build a house both efficiently (tools, techniques, sequencing, etc.) while meeting regulatory and bioenvironmental goals (airflow, water control, power, waste, etc.), because it's a whole glut of little things to know, most of which are not "hard" by themselves but overwhelming in totality.
for the inexperienced, i'd heartily recommend volunteering for habitat for humanity (at least a half-day weekly, more the better) and asking lots of questions of the experienced workers there to learn those little things (esp. the locale-dependent stuff) while networking with them to boot.
Yeah, but the GC also has all of the good subs. The good subs all have work with GCs -- what normal people can pick up are the "left overs" (not every "left over" is terrible, but probability is high).
I'm curious about US price of land. I looked into building a place in the UK, and the price of land alone was a blocker.
In the rest of Europe prices are much lower, I'm currently building a house in Northern Europe on the outskirts of the capital (within city limits) and we paid €30/m2 for the land in 2019.
For most it's far more expensive to get bogged down in litigation than just buying the lumber at whatever the asking price is. So now they've got to cut corners or find another way to make money despite of their elevated holds of lumber.
The result may very well be deflation, as contractors are now forced to undercut each other to get new building contracts, as lumber production has been increased to meet the demand. That is if you can afford to wait.
Think of it like a traffic jam. The cars behind the lumber car won't be able to move before it can move, and then—due to market insecurities—the lumber car might not even be able to go full steam ahead. Because no lumber producer wants to producer more lumber than necessary, since that'll only lead to the price dropping unnecessarily. And so we're stuck in a situation where the line leap-frogs slowly forward until the guys in the front finally feel safe enough to push the pedal to the metal.
There's zero reason for prices to go down. None. I've read that plenty of houses are being bought even above asking price, so cost of building isn't a real factor.
Sure, I'm not counting the crash where all the clueless dumb money will try to sell their houses.
When the bubble pops only the idiots will try to sell, and the smart money will grab whatever they can. ROI in terms of "old money" is irrelevant. What matters is getting rid of old money and investing it in something that brings in new money post-crash.
Neighbors just sold their house, went for $5k under asking in one of the best school districts in the state. I think it's over-priced still, but w/e. Point is there hasn't been a whole lot of selling under asking price going on, and now there is.
We are in a housing shortage [1] which is driving a home-construction boom [2] powering a construction-labor shortage [3].
Until that labor shortage is resolved, via higher pay (which, depending on the rate of new entrants, will either reduce margins or be permanently passed along to consumers) or via new recruits, raw-materials cost advantages aren't going to be passed along to consumers.
[1] https://www.federalreserve.gov/econres/notes/feds-notes/hous...
I've been discussing with builders for the past few months and they state that the main issue is the lack of low-skilled laborers. They claimed that many workers at that level left >18 months ago and haven't returned due to the protracted, bonus unemployment that they were receiving, which recently has expired.
Almost all contractors/builders expect the low-level workers that have been on the sidelines to return over the next few months and project to be able to handle 2x the work by Spring 2022.
Doubt. I've been on unemployment before. If you're skilled in the slightest, they are putting your ass to work quickly. If you're unskilled, but can lift 30lbs, then they are putting your ass to work pretty quickly. The people managing to run out the clock on unemployment are basically 50+ year old women, or those who are really good at gaming the systems which are not easily gamed.
I built a house in 2018 and there was a huge construction labor shortage even them. Partially due to difficulty getting immigrant workers and partially because people who left the business after 2009 are only recently starting to be replaced.
Check out the number of people who were still receiving unemployment when the federal bonus ran out and compare that to the number of open entry level positions. People were/are absolutely choosing to say home instead of finding work.
Who can blame them! It is the smarter decision.
The US Gov’t should have stepped this down much earlier. Now we have a decent sized group of young people who have spent the better part of two years expecting checks in their mailbox and no student loan payments. Reality is going to hit them hard.
I think our collective charity is running out. IMO, All this is going to result in is childish tantrums demanding “basic income” from able bodied people who are finally being forced to to accept the economic realities of their position.
We decided to stay put in our existing home for the time being. I don't think housing prices will likely go down much, but maybe level off a bit? The rise in the Case-Shiller index certainly doesn't look sustainable: https://fred.stlouisfed.org/series/CSUSHPINSA
Why would you want a HELOC just because you can't sell your house for a profit?
If you are unable to sell the house and don't have a nice savings cushion, you need to look at a HELOC to pay for it.
Since sellers often pay real estate agent fees and some others, you need a pretty decent sale price above what you owe on the mortgage just to break even... And then money for moving costs and a down payment on wherever you go next.
Edit: it is also not uncommon to take out a HELOC to pay for sprucing up a house- flooring, new kitchen, etc- if you are struggling to attract any buyers at all. I've known people in smaller towns go into debt just to sell their house because they had to move for a job. They even tried renting it out for awhile since noone was buying, and the renters ended up trashing the place, so that made it even harder.
Couple years from now it will settle down and carpenters and tradesmen will be fishing for jobs again and lowering prices for consistent work instead of like now where they can throw out a even the shittiest net and catch over their limit.
With that said, labor shortage in the trades is probably the biggest culprit at this point. Even before the pandemic, in some areas you couldn't get a contractor to come in to do anything unless it was a massively profitable project. I had contractors walk away from 6 figure projects because they weren't big enough.
The pandemic made it a lot worse. Plumbers here are booked 6 weeks ahead for anything that isn't an emergency.
Lumber is but one input cost. Labour is another, and it's still in short supply.
>but I think there's simply some "get high prices while you can".
Well, builders are under no obligation to provide services at cost plus.
Much the same way air-con units and fans cost more in the summer compared to winter - prices do seasonally fluctuate and those can have a knock on effect. So cheap timber will drive up the other items with demand, so you can almost foresee once timber goes up, the ancillary items will come down due to demand again. That and winter, will curtail some demand and that may well be the time for buying some items.
None of the mills started expanding or engaging in capital programs to try and take advantage of the increased prices.
Oh, nice call out. I wish there was a way for me to get information on stuff like this in general. That is the proxies for the future like you say.
Doesn’t have to be profitable. It could be stuff everyone trading lumber futures already knows. Just for curiosity and so I can validate my news sources.
https://www.woodworkingnetwork.com/news/canadian-news/canada...
This was predictable and extremely profitable trade. I made a lot of money this year from this alone.
The price increase was a result of a usual 90 day delivery for new contracted lumber and nobody anticipating people would actually try to build houses in winter time (which they did). A lot of production was wound down and supply contracted out in the future was pulled to earlier dates leaving future contracted lumber demand unfilled leading to price spike and then a crash after extra supply was brought online.
All the information is available but you have to pay for this. There are companies specializing in getting this info for you daily by calling lumber mills.
Fwiw, timber itself is only up about 10% (comparable with 2010 prices)
On the bright side, a lot of reports are available for free from the government sources.
If you're up for it could you teach me a bit about this? I'm new to commodities (lumber, gold, etc.). My email is in my profile.
Yeah and that was obviously the entire idea about the trump tariffs. Saw mills in the USA are insufficient, that's the point of the tariffs, those jobs are supposed to come back when capacity is being increased.
Here is more information including a 7% job growth for loggers
https://www.bls.gov/ooh/farming-fishing-and-forestry/mobile/...
""Low mortgage rates, low volumes of homes available for resale, favorable demographics, increasing acceptance of remote working and the underlying housing construction deficit due to several years of underbuilding appear to be positively influencing the demand for new housing in North America," the company wrote in an earnings report. "Economists are forecasting U.S. housing starts for 2021 to be approximately 1.5 million units, an increase of nearly 9% over 2020. An aging housing stock and increased repair and renovation spending should also continue to drive strong lumber, plywood and OSB demand.""
The price increase was not relevant to their expansion, but long term trends in which the price increase was irrelevant.
I'm a bit doubtful about this because I know that even German mills started to produce lumber with US dimensions, causing shortages for metric lumber locally.
If they thought this was permanent, they would have expanded to supply the USA, rather than doing so at the expense of domestic production.
But, if there was an expectation that these price levels were going to be sustained, the mills would have started engaging in capital programs to increase their capacity - because, and this is critical - there was no supply of raw-timber issue, indeed - the price of raw timber didn't increase.
That those capital programs did not take place, is the strongest representation I can think of of Mill owners true assessment of the long term prices.
Really the only people that were saying that prices would remain high had a vested interest in keeping it high. It is such an insane position to even take considering that a pandemic is a temporary thing. Prices don't just pump like that and stay up. I know that there are a lot of people that say those kinds of things, but they are fear mongering and trying to cause inflation through self fulfilling prophesies.
:
> Really the only people that were saying that prices would remain high had a vested interest in keeping it high.
Not seeing a connection here.
Fox has been selling out of control inflation since Obama and once Trump came in the story magically disappeared (even before Trump took office and could make policy decisions) and then after he was gone it reappeared. In fact, the stories appeared even before Biden took office. Similarly stories about the DOW being all time high appeared before Trump took office. As if the DOW or S&P500 being at an all time high isn't a normal occurrence and the index operating like they should but rather that this was because of the market "being excited" about a "more business friendly president."
Fox wants to sell you that the world is shit when the democrats are in office. CNN wants to sell you that the world is shit when the republicans are in office. News does move markets. Same with presidential tweets.
I remember when gas prices peaked back around 2006 everyone said "gas prices will never come down, peak oil, blah, blah". 6 months later gas prices crashed by 75%.
Keep that in mind when people talk about housing prices or the stock market. "It's different this time" is rarely true.
Imagine being criticized in 2035 for believing in 2020 that climate change was going to permanently change the world.
So that is a fear that I wouldn't call baseless. I don't think lay people expected the kind of technical innovation that happened in the petroleum industry in the past 15 years.
I believe that the initial shock of high prices was very good for some businesses, and they systematically colluded to sit on inventory. You could physically see it in some places.
But those forces are not as strong as supply and demand so it came back to something approaching reality.
For electronics parts, the pandemic introduced large numbers of speculators who buy and hold parts for gain, those actors create an odd dynamic in the system that would do something like create higher prices, then crash as prices fall and they are forced to sell and the market gets flooded a bit.
Could just be ordinary conspiracy speak, or maby there's more to this story after all.
—Herbert Stein, economist
I'm under little illusion my cell phone bill is ever going to go down.
Are we talking about heads on CNBC or the guys who were actually able to put eyes on the mills, rail yards and whatnot? Because this crash is spot on with what the latter was predicting. Everyone was over-producing to get in on high prices and the demand just wasn't there.
COMMODITIES
Western Wildfires Lift Lumber Prices
July 22, 2021 04:45 pm ET
Fires are threatening an important swath of the U.S.’s wood supply, pinching output that has been under pressure since the pandemic touched off homebuying and remodeling booms and sent lumber prices soaring.
COMMODITIES
Lumber Prices Are Falling Fast, Turning Hoarders Into Sellers
June 15, 2021 08:29 pm ET
Prices have dropped from record highs spurred by the economic reopening, potentially pointing to an eventual return to normalcy.
COMMODITIES
Despite Lumber Boom, Few New Sawmills Coming
May 17, 2021 04:49 pm ET
Executives in the cyclical business of sawing logs into lumber say they are content to rake in cash while lumber prices are sky-high and aren’t racing out to build new sawmills.
MARKETS
Lumber Prices Break New Records
May 3, 2021 04:49 pm ET
Home buyers and renters are bearing the brunt of rising wood costs, while sawmills are poised for another quarter of big profits.
MARKETS
Lumber Prices Notch Records on Building, Remodeling Boom
February 16, 2021 05:17 pm ET
Lumber prices have shot to fresh records, defying the normal winter slowdown in wood-product sales in a sign that the pandemic building boom is bowling into 2021.
COMMODITIES
Lumber Prices Rise Again
November 20, 2020 04:42 pm ET
Lumber prices are making an unusual late-season climb, thanks to builder-friendly autumn weather and suppliers stocking up for what they expect to be another big year for home construction.
Timber is abundant and lumber mills are pretty easy to get going. If you live anywhere near where timber is grown, there's almost certainly a handful of mom-and-pop mills around you. The moment prices elevate for an extended period of time, these operations will start looking to expand.
Now if I could just buy a GPU for a normal price...
The only "other coins" available to be mined with GPUs are tiny. Ethereum classic has only a 8B market cap, Ravencoin with 1B, then many sub 1B coins.
I looked up prices recently and it's worth more now than when I bought it, and the ones available that I've seen are used. Had no idea that would happen and now I'm just happy I have a graphics card at all.
I'm kind of glad I did now, since I'm still unable to upgrade. The extra oomph is ensuring new games still run decently for a bit longer...
The best recommendation I've gotten so far is to get a gaming laptop instead, because the entire laptop costs about the same as the desktop version of the same GPU.
Maybe that's shitty advice, I'm not a PC gamer, just looking for something my kids can use. But a coworker did exactly that and he raves about the decision.
its been the most exciting fulfilling adventure of my life so far. just got first harvest last month.
i do use compost, cow manure + fir chips. just had 28 tons delivered a couple weeks back.
But you actually did it and living the meme. Kudos!
The rest of us would likely poison ourselves, break something, or starve if we tried.
Living things are pretty far from my area of expertise, and youtube videos only get you so far.
* You play as a character who quits their software engineering job to fix up a run down farm you inherited from your grandpa.
id like to write software in the winter and farm in the summer.
To give an example, I can buy a few pounds of potatoes for $5, and I cannot possibly see how I could do better than that myself.
i think crop selection and distribution/marketing are going to be key areas for me to get right in order to have a good return.
Do you feel like you are “working” in a traditional sense? I myself think I will have some sustenance-level farming as a hobby but I don’t think I would commit to doing it as job; I’d probably do a bakery before then ;)
what i have going for me are the next to zero operating cost and the fact i am hardworking and i learn fast.
however this is not my only iron in the fire, i am starting a small web development consultancy and seeing if that takes. and im also framing houses right now. its all about acquiring the skills i need to make this work. even if that means im not making very much yet.
its an entire shift in lifestyle. different problems and challenges than you get in the city. throwing money at the problem isnt always the optimal solution here (for me), its much better to be able to do stuff yourself. then you dont have to make as much because you dont have to pay anyone to do anything for you. i can fix or build just about anything. eventually.
if i keep my overhead down, its all profit.
Seriously, this is a welcome correction, and another sign that runaway inflation fears were based on hyperbole.
Maybe I'm ignorant of the inflation argument more than anything else but it doesn't even pass the sniff test in my opinion.
Just because QE doesn't create inflation doesn't mean it is a free lunch though. QE purchases treasury bonds and effectively takes them out of the market. The government is paying interest to itself. There are institutions that need those treasury bonds which results in a collateral shortage. These institutions will continue buying treasury bonds driving interest rates slightly negative leading to a "technical" form of deflation however it is quite insignificant.
https://fred.stlouisfed.org/graph/?g=GOR4
(Both indexed to 100 as of the beginning of the 2007 recession)
QE and stimulus can certainly contribute, but "as much" is a pretty big overstatement. If anyone thinks inflation was a notable fraction of the price quadrupling, they're being ridiculous. Even a huge amount of inflation would only be 2-4% of the lumber price increase.
The TLDR is this. I borrow a million dollars, and give it to you for a house. You deposit it, and your bank loans 97% of it to someone else. They deposit that, and loan 97% of that out again... ad infinitum.
Commonly this is called the "money multiplier."
This is how it's taught in school. The more-accurate version is that "whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money" [1].
Interest rates make borrowing cheaper. That spurs demand for loans which lets banks create deposits. To have the capacity to make those loans, the banks need sufficient reserve margin to meet the reserve requirement. This is usually a non-issue. They also need enough risk-adjusted capital. This is usually the issue. But if a bank needs more of this, and interest rates are low, it can buy the reserves through borrowing or equity issuance. Lower interest rates make both cheaper.
[1] https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
Decrease in interest rate increases money supply (increase in lending -> new deposits).
If there are plenty of investments then limited resources won't allow you to do all of them, otherwise we would have grown our economy all at once in a single year. The interest rate is compensation for deferring consumption. i.e. you are being compensated for the opportunity cost of not spending money on consumption. The interest rate goes up in response to the profitability of investments. If I can earn a 8% every year then I am willing to take a 5% loan. Inflation makes investments appear more profitable than they are so the interest rate has to be raised according to inflation.
Well, ignoring 2020 and 2021 inflation was really really low to begin with. It's been at 2% at most. When inflation is low, interest rates can't go much higher. The fact that interest rates have gone down all the way to 0% (especially in Europe and Japan) without causing any meaningful inflation tells us that the interest rate is still too high to attract borrowers.
If one really wants to know whether interest rates drive inflation one must precisely define the term "low interest rate" because it's all relative. It's relative to inflation, it's relative to investment profitability and relative to how many people are deferring consumption (aka saving). Just because 0% is a really low number doesn't mean it's low enough to cause inflation.
From what I have heard (i.e. I don't know if it's true), large businesses are being overfunded and small businesses underfunded with loans. It's entirely possible that some structural reason is preventing lending that is completely inelastic to the interest rate.
That being said, taking out the "runaway" adjective, inflation should be expected as a logical consequence of the monetary policy at least in US and Europe, and as a matter of fact, consumer price index are already up all across the board and both Fed and ECB had already adjusted their inflation target up. This should surprise no one, you just cannot increase the monetary mass by trillions in the year where the global economy shutted down due a global pandemic and not expect an inflationary spike. The global public debt won't be "paid" without an increase on inflation.
And this is not a criticism on the political behind this. The decision was made to ease the economic impact of the pandemic both in the general public and the private sector and in most cases this was achieved, but that doesn't mean the impact does not exist, is just that is being spread out in 20 years, and part of that would be on inflation.
Just a minor caveat I would have with your answer is that inflation cause price increase, when for me the price increase is just an indicator of inflation, not a cause or consequence of it.
https://www.wsj.com/articles/high-steel-prices-have-manufact...
We had to design this thing twice due to fluctuations in metal pricing. The original design was all aluminum. Then came all steel, because aluminum became far more expensive than steel. Then a hybrid and now steel only. There are other factors, such as the relative cost of TIG vs. MIG welding, yet, when your material costs increase nearly four-fold you can't ignore it.
By the time we finished a reduced scope prototype materials pricing and availability was just insane. This has affected other components, like fasteners.
At this time, any quote we provide for product development --be it electronics, mechanical or both-- includes language to say that we cannot hold pricing on anything for more than one week. It's got to be that crazy. If you are not very careful you can easily end-up being very busy while losing money.
Tl;dr...Meh?
It's up but historically it's not that high, it just cratered for most of the teens.
Aren't these inflationary?
I think the main problem is how people use "runaway inflation" and "hyperinflation".
It seems like most people using these words are imagining a world in which prices go up 5-15% (max) every year for years.
That is very abnormal for the US. But not hyperinflation. Even the 15%. Hyperinflation is reserved for situations like Venezuela and Zimbabwe (and, of course, Germany long ago).
I don't think hardly anyone sees inflation in the US to be as bad as it has been in Argentina. One might describe that as "runaway". But it is not hyper. And there is almost nothing in the US that has inflated at that level - let alone any indication that general inflation will get that bad.
Rather than clear timber and plant new trees, you can get paid for the carbon they sequester: https://www.wsj.com/articles/new-carbon-market-pays-southern...
> It’s difficult to ship lumber overseas cost effectively: lumber is (or was) one of the least expensive materials on the planet. At $300 per 1000 board feet (the average price over the last 25 years), a 20 foot shipping container holds just $4500 worth of material. The cost of transporting a container across the ocean is $1700 dollars or more.
What should have been a good alternative here, is to prevent/taxe massively exports of wood from EU to NA. Prices would have stagnated near a peak in NA and we would have kept our wood supply at a moderated price, here.
https://www.newsobserver.com/news/business/article238395173.... https://www.politico.com/news/magazine/2021/03/26/biomass-ca...
Article indicated It went up to 3 times the price and is now down to pre rocket prices. Charts seem to agree?
In other words, the media is often radically hyperbolic to get clicks and ad views. So much so that when they use the same adjectives correctly they don't carry any weight anymore.
They're the boy who cried wolf.
I just don't think the random numbers you asserted are real at all - this would be something that one would need to test.
Anyone getting their 'market moving news' from BusinessInsider/financial news sites is doing it wrong.
It means that the hypothetical author of the article didn't have any idea what they're reporting, which is exactly what I was trying to express. The authors rely on the readers' ignorance and the way many people reflexively accept numeric data as true, pertinent, and sufficient evidence of any claim.
That’s a cool website thank you for sharing it.
If I went and lifted the NYT CSS files and registered some intentionally misleading domain / company name like "Times of New York", I could go around saying whatever I want and a good number of people would believe it. Fake news is worse than wrong, its divorced from reality. There never was a journalist trying to get it right to begin with. Fake news is a click farm in Macedonia, not a news outlet that made a mistake.
See also: "deep state" (which has now been bastardized to mean "shadow government").
Sure, buying the genuine watch supports the IP holders and gives you bragging rights, but both the genuine and the fake are bad choices when you're looking for a high-quality, durable and precise watch.
> There never was a journalist trying to get it right to begin with.
By this standard, regular news would be fake news too. You don't get manipulative language in the article when someone is trying to "get it right" - it only shows up when someone is trying to get it wrong, on purpose.
--
[0] - I.e. what computing hardware and home appliance vendors do all the time.
Fake news is like the man at the store told you it wasn't ticking because it just needs to be wound up, wouldn't let you take it out of the box, and you got home with it to find the dials are painted on and the inside is a few coins glued together. Whatever legitimate gripes one may have about Rollex cutting corners, it would be laughable to pretend like the time on their dials is just as useless as the ones painted on the fake watch and really its all just an opinion which one is "real".
What do you call something that looks deceptively like a watch but is actually just a prop? I'd call it a fake watch. What do you call a website that looks deceptively like a news organization but is actually just outrage headlines made from mad libs for clicks? I sure wouldn't call it real news.
Not some silly fantasy speculation good, like crypto or... overvalued stock.
Although it just "cratered" or "crashed" back down to entirely normal. Doesn't look like there's any oversupply glut causing it to overshoot to the downside. Lumber companies will have to learn to make do with charging the same prices they charged before the pandemic.
> Not some silly fantasy speculation good, like crypto or... overvalued stock.
Apple is not a “silly fantasy speculation good” anymore than a lumber futures contract.
Doesn't seem to support your claim that these are scare quotes at all.
I wonder if anyone knows the reasoning behind these different patterns.
I don't know about the other stuff though.
You can store a million dollars of gold in a suitcase. A million dollars of oil at $10/barrel (the price right before the crash) is 3.5 million gallons of oil that has to be stored somewhere. And on a physical delivery futures contract you’ve agreed to take that delivery.
99.999% of oil traders are incapable of taking or providing delivery for settlement because of this and what you witnessed was nobody wanting to get caught holding the bag.
When I click on the 25Y and 'all' views, it definitely looks like a hockey stick.
Ergo the popular narrative of lumber prices has been accurate.
This is known as the bullwhip effect: https://en.m.wikipedia.org/wiki/Bullwhip_effect
Do you know about any books that might expand on the subject, maybe mentioning other effects?
I'd expect localized shortages of almost anything, if it has to be carried by sea.
> Lee said when it comes to new home construction, pricing is being complicated by ongoing pandemic-related supply chain challenges. While difficulties related to lumber have eased, home builders are still dealing with delivery delays and price inflation on everything from plumbing and electrical products to kitchen cabinetry.
> "It doesn't compare to the three to five times price increases we saw with lumber, but I'd say on average, we're seeing 10 per cent increases on everything, including the kitchen sink," Lee said. "And we are still seeing delays on closings, just because of an inability to get products and materials."
Meanwhile... August 27th, 2021:
> "...households, businesses and market participants also believe that current high inflation readings are likely to prove transitory," Powell said.
https://www.reuters.com/business/why-fed-chair-powell-still-...
Sigh.
Nobody believes that, Jerome. Nobody really believes that.
Things were shitty before covid happened, and many were expecting a recesion in 2020 before covid existed, markets siezed up late q3 19, and needed help then. The world has since been living on vast quantities of high grade heroin dished out all over the world, quite rightly by various central banks.
Only once the covid tide goes out we will see who has been swimming naked.
If another similar size country becomes a more stable option, then I would be worried.
I am not certain they have as much power over inflation as they think. The US have been trying to drive higher inflation since 2008. Japan have been trying to drive higher inflation since 1990's. Europe have been trying to drive higher inflation since 2014.
Printing money, making money free, paying people to borrow, buying assets, bonds, mortgages even stocks has been attempted. We have gotten to the point of literally putting money into peoples bank account, and finally have an inflation print akin to pre 2008 in the US and Europe.
I'd sadly say the US has (like any empire before it) used wars and similar methods to achieve the opposite. Not always effectively but still.
Check a lot of countries in the world peg to the dollar even when it doesn't seem economically sensible. Remember when Japan in the 80's was forced to do technology transfers to the US, import minimum quotas of US tech and limit it's exports whilst adjusting their monetary policy to help out the US leading to a crash that preceded the lost decade?
It's not because they loved the US so much that they did such things.
Totally agree - but the bust comes after the war... based on the size of spending, one could make parallels between war and covid policy. A trick old as time to stir up a war to distract from political problems. Borrow and spend is justified (unless you are a traitor and vote to kill our troops). But the flip side of that things are ugly - but it is always the next guys problem.
With so much money readily available for investment, speculation was inevitable, particularly in the Tokyo Stock Exchange and the real estate market. The Nikkei stock index hit its all-time high on December 29, 1989, when it reached an intra-day high of 38,957.44 before closing at 38,915.87. (sounds familiar perhaps?)
The 1990s in Japan was the beginning of economic turmoil and recession for that particular nation; resulting in their Lost Decade.
The “Making Sense” podcast [0] covers the deflation / inflation debate in detail and is a great listen.
[0] https://podcasts.apple.com/us/podcast/making-sense/id1506469...
Which is also the view of the Fed and the ECB, so not a particularly weird position from Krugman.
I don't think building has been an option for low income families for a while, or maybe I just know of very few markets where land was the limiting factor instead of materials & labor.
(Diff with https://usatoday30.usatoday.com/money/industries/retail/2004... to see some interesting similarities. "Suits are back, and so is lumber.")