The Expert Podcast

The last remaining market for the lumber industry is starting to deteriorate. Obviously, new home building is still up, but a lot of the home remodeling has been done. People who had to stay in their house due to the pandemic, interest rates, or the economy have pretty much completed all they're going to do on their homes. Now, with the economy deteriorating further and higher interest rates, there is much less activity in home improvement. That's starting to affect lumber yards.

In Oregon, on the Oregon coast, three lumber yards and lumber production companies have shut down in the last 90 days, resulting in several hundred lost jobs. This trend is visible in the Pacific Northwest, even as far north as Vancouver, BC. Even some of the hardwood yards are starting to cut back.

We're already starting to see more and more of the economic impact on lumber and construction. There is still a backlog of new homes to be built; however, demand is starting to fall off due to high interest rates. When interest rates were lower, there was a big boom, but now, with rates almost 8%, many people are being priced out of the market.

For example, a $500,000 house at 7.5-7.8% interest could mean a mortgage payment of almost $4,000 a month, and with tax and insurance, in some markets, it could total close to $6,000 a month. This has significantly impacted the lumber industry and even affected home improvement chains.

So, what are you seeing in your market? What do you think will happen? What's the labor market like in your area for contractors and tradesmen? In most markets, specialized trades like electrical and plumbing are still busy, but what about framing, insulation, and roofing?

Lumber prices did come down from their peaks a few years ago but remain relatively high. For instance, in some markets, OSB (oriented strand board) can still cost around $50 for a 4x8 sheet. Labor rates also remain high, with skilled trades charging $30-40 per hour, which is affecting home upgrades and reducing volume, thereby impacting the market and the percentage of homebuyers who can afford a house.