There a shift in home building and lumber shortage.
Home building demand has been extraordinarily high the last two years and lumber prices have been up over 200% from 2019. Like all markets, extreme cycles generally swing back and I am starting to see that trend.
Raw lumber the last two years has never been in short supply. It is the manufacturing of the lumber into the usable sizes that has put a forward press on the prices. It seems that manufacturing is catching back up to replenish a huge void in inventory left from even before the pandemic. In 2019 the economy was at all time highs nationwide and home building materials such as lumber were already depleting reserves. Then the Pandemic hit, it closed down manufactures for a time and home building demand spiked. This created the crunch we all are familiar with. Even the glue used in common plywood was desperately on back order from the shut downs.
We are now seeing a replenish in supply. Even a casual observer can consider that factories with marked up products would function at maximum capacity to capture those returns. At some point the maximum output from competitors will create competition and bring down prices. Remember, there is no shortage of the raw material: wood. Only in the manufacturing and supply of the product.
Home building has actually declined the last few months! Not something we are hearing in the news, but it is happening. This could be from the extremely high prices of all materials causing builders to wait for a better time to build. Even low availability of overseas materials that are backordered or a lack of workforce could be factors. We have seen very little new construction
over the last 5 years throughout Western Nevada County, especially Grass Valley, Nevada City and Penn Valley.
Given all the reasons for tightening on the new housing market, we can begin to entertain that prices could come down once the industry reserves are soon filled.
Opinion piece by John Boyer, Realtor®
