The Expert Podcast

As we've talked about quite a bit before, the lumber industry has been the backbone of construction and even the larger economy for a long time. When we had our major lumber price fluctuations back in 2020 and 2021, it was part of the reason that the real estate market got thrown out of whack. When the lumber prices went up, nobody could build houses reasonably. There were supply chain shortages, and even some of the mills got curtailments where they were cutting back production. Well, now it seems like it's swinging the other way.

There's a lot of news we're seeing. Here's a good example of lumber producers expanding operations. This particular operation is in Central Oregon, in Phomi, and it's a big lumber town. It's a little bit inland from the coast, so you get a lot of the Coast Range materials coming to be produced there, and you also get some from the Cascades. This is a good indicator of the U.S. lumber market. They are working on some projects to add sawmill production. This is a $4 million project, and it shows their stability in the demand for building materials.

It's tough because when interest rates go up, builders aren't champing at the bit to want to build a ton of houses. On the other hand, it's a paradox because there's a shortage of homes. The fact that home prices are up in the $400,000 to $500,000 range for a median-priced home means that builders are tempted not to build. They know that the market is in demand, and there aren't enough houses to sell. But when rates are high, they fear there may be some people who can't afford to buy houses anymore.

In this case, the mills they are adding are for hardwood, so this is for trim, cabinets, and furniture. It's still part of that real estate development industry. It shows that there's enough confidence in speculation and belief that the building trade is here to stay. There will still be homes, additions, and remodels being done. It's not like it's going to drop off the map, even with housing prices at $400,000 to $500,000 and interest rates at 8 or 9%. We predict 10%, and it's not going to create a bubble or a crash in the housing market. The biggest reason why is because there are still millions of people who need to buy a house but can't find homes for sale because there's simply not enough to go around. There's a shortage.

According to the CEO, there's a real opportunity. "We can produce and market products that are in demand while making it possible for forest managers to perform activities for proper development of the resource." It will remain to be seen how this plays out, but it's very obvious that the big players and big money are believing that the lumber market, which is a domino effect of the real estate market, is here to stay. It's worth putting some money into.

I know you have an opinion about that. Let us know in the comments what you think.