The Expert Podcast

so lumber prices are flagged as having gone down lumber prices crash lumber prices fall to their lowest level does that mean it's over is the lumber crisis done is the real estate crisis done is everything going to go back to where it was and we all kind of pack up park are anxieties and go back to two thousand seventeen eighteen now that's not what it means so don't let the headlines for you lumber prices are down but it says fall to their lowest level in two thousand twenty two what's that even mean it's only may that's just me that's the lowest in the last four months means nothing and mortgage rates are higher sure it is it says dent tells in demand well then it might be a good word to weigh this headline reads it's almost like things are crashing getting back to normal but think about if you ever had a dent in your car did ruin the car that really changed the what the car was all about no so if there's a dent in housing demand that's not gonna change anything so let's talk about lumber press first what that mean lumber prices fell below eight hundred dollars on Monday well couple years ago there are four hundred dollars so it's still double what it was number is double let that sink in lumber is still double
now it's thirty percent year to date decline and that's because it was at twelve hundred in January but it's at a hundred which is still double I can make a big difference in affordability compared to few years ago
says slow down in demand due to surging mortgage rates well the the home builder survey revealed the slowdown in demand how did the home builders know that have to do with rising mortgage rates how do they know that was the reason the home builder doesn't know why there's less demand now it's happening at the same time that mortgage rates are going up so maybe it's a coincidence maybe it's cause and effect but we don't know for sure that's the reason decline comes as mortgage rates soar to levels well I'm about sore they've gone up it raises the cost of buying a house five point two seven versus three point one one at the start of the year to two percent difference it says leads to mortgage payment difference of well over fifteen hundred depending on the price of the house well that's also a little bit of a misleading thing for a let's say two percent difference to result in fifteen hundred dollars a month more you have to be talking about a nine hundred thousand dollar house that's how much of a house raises the payment fifteen under so if you're out there looking at a million dollar house yep your mortgage rate your mortgage payment went up fifteen hundred most people are looking at a nine hundred thousand dollar house they could be but that's more than double the average almost triple the one a troubled average right now is about three eighty four hundred so it's more than double the average so it does make a difference I'm not saying it doesn't make a difference but the articles trying to make it seem like more of an this home builders slowdown in entry level due to payment shock well how much is it make a difference in the payment on the entry level house well let's say an entry level house is four hundred thousand dollars four hundred thousand dollars and you have a two percent increase in rate on a four hundred thousand dollar house well that's eight thousand dollars a year in interest which equals probably about six fifty a month that payment is that a significant amount more sure it is that's a pretty decent jump six hundred dollars a month but is it payment shock well it could be but is that the reason why buyers are pausing it may be this is first time buyers may not qualify debt to income gets out of work whack they may not qualify for that house but they may qualify for something else so we can split hairs and argue about the interest rates at all we want but the most important thing about this article is the lumber price it's still at eight hundred and as we've seen before in other videos it's going up and down over the last couple year it's been below eight hundred before and then back up to twelve hundred so the key to lumber prices is it's volatile it's volatile it's jumping up and down all the time builders can't count on the fact even that it's eight hundred because even if you price out your your lumber package right now by the time you get your permits and site work and foundation everything in place it might be six or eight months down the road six or eight months it might be back up to eleven hundred it's probably never going to go back down to four hundred again or five hundred even
the market has already shown it can absorb near thousand on a regular basis and still build home a build homes interest rates will have some effect but remember interest rates were way more than this they're almost double this in the eighties and nineties there were seven eight nine percent even over ten double digits people still bought houses built homes homes are cheaper incomes are less to so yeah the lumber prices are down but it's not a dramatic return to normal it's not even really a crash it's a temporary decline and if your builder you still have the plan on your lumber package maybe being back up to a thousand eleven hundred by the time you execute your buy unless you want to buy it now in store for six months which most builders don't want to do probably gonna cost yet few grand to do that you can have some loss of damage in the meantime want to buy and have it delivered when you need it on a movie twice so if you're looking to bid a project you have to bid it on a sliding scale if you're a homeowner this doing the dition remodel new new build your prices are going to still come in at the with the average has been the rolling average for the last three four months you have to expect that you your interest rates to be higher if your financing it getting a lot of credit none of this changes the fact that there are still severe supply chain issues you can get lumber for the most part most of the the good you need for lumber are available occasionally you might run out and so on certain things and spot locations but usually within a week you can get it you know if there's a a rare side maybe a six by six you need are some laminated goods maybe that might be out of stock but you can usually get it by the time you need it we're really there's a problem at the finish items countertops cabinets appliances fixtures some trim items those are items that are problematic in terms of getting delivery yeah the prices are up but the problem is even getting them there's certain appliances dishwashers and refrigerators that are out of stock note no you know no time horizon for getting those that's gonna be the bigger problem the other big elephant in the room is labor elder or a contractor or even a subcontractor getting help for your projects even if you're an electrician and you need journey meant to work for you to do some of the the busy work tough to find them when you can you have to pay a lot more for them and a lot of times are not reliable they don't show up this is the bigger effect on the build then the lumber price so when you see this lumber price fluctuating up and down sure went down next week you might see it goes back up whether it's eight hundred nine hundred eleven hundred or even at six hundred those are the big things that are going to affect the the construction industry interest rates will have an effect certainly but there still is an under supply there still are five million people playing musical chairs that don't have a house to sit down in five million too few houses out there that's not going to change overnight interest rates are just going to make it more painful for that renter or that person who doesn't have a home that's moving out of the parents house graduate college to buy a house and they saw the buy something it's just gonna be more painful it'll have a little price pressure on the upper end at the margins but not necessarily change the number of houses that need to be built it's still going to be consistent put your comments below let us know what you think ask any questions we wanna hear from you so we know what are the hot button subjects a sensitive topics to discuss in the future videos and if your contractor let us know what your experience is what you seeing in the market what your clients saying are they sensitive up price are they sensitive on time they want to get done soon so they don't get shut out on their interest rate for their home equity line there's also a stealth factor where people are doing that great resignation they want to quit their job they want to not work for the man anymore but if you're buying a house you can't quit before you close on your on your deal so if you're building a house until the houses built done closed your moved in you have to stay locked into your job every day you go in hating it that might put pressure on you as a builder so let me hear what your feedback is from your clients whether it's a remodel client an addition or even a new home build we'd love to hear