As inflation soars, DIY home projects are on hold. Why DIYers aren’t paying the sticker prices for needed renovation materials.
Inflation Stalling Home Improvement Projects
According to Russ Taylor, a market consultant with Vancouver-based Russ Taylor Global, “The DIY sector is eroding because inflation is up. Buyers are just walking away and saying ‘I’m not going to pay that kind of price.'”
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Lumber Prices Falling to December 2021 Levels
Lumber, a huge component of the home renovation market, is experiencing huge declines in both pricing and demand since inflation took off. Futures pricing for lumber has dropped about -30% since the beginning of March to approximately $870/1,000 board feet, according to the Chicago Mercantile Exchange.
Simultaneously, lumber inventory is piling up due to the current stalled demand from wholesale buyers such as Home Depot and Lowe’s, smaller retailers and contractor yards.
Taylor sees lumber prices dropping below $600 before a slight uptick in May when DIYers tend to engage in home renovation projects. Know that 40% of lumber consumption in the US is driven by the home renovation market.
Too Much Inventory
In a housing market screaming for more inventory, the home renovation market in general and the lumber market specifically have excess inventory.
Transportation glitches have left many North American lumber producers with stockpiles at sawmills. Lack of rail cars, lack of truckers and damaged roads are essentially forcing “…(lumber) producers to sit on a lot of inventory because they can’t ship the stuff,” said Mark Wilde, an analyst with BMO Capital Markets.
Some Western Canadian lumber producers such as Canfor and the world’s largest lumber producer, West Fraser Timber Co., have cut back their operating schedules at their sawmills because of their inability to ship their lumber products.
Supply Chain Disruptions Due to Transportation Glitches
As everything is related to everything, cutting lumber production due to transportation glitches is affecting already “disturbed” supply chain distribution. Wholesale lumber buyers are not interested in buying more lumber, or any other building/renovation materials, until their current orders get delivered.
Paul Quinn, an analyst with REC Capital Markets, summed up the situation clearly in a recent interview with Bloomberg. Quinn said, “The price has come down because people haven’t got their lumber. They’re hesitant to buy more.”
Pay attention flippers and individual DIYers who are looking to buy homes to repair, fix up and/or renovate. There may not be the products and materials you need/want to do the jobs these houses need done to make them profitable.
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