If history can
be used as a guideline to simulate the next housing
“up-cycle,” then the prospects for huge
price increases look very exciting!
Since every U.S. housing market slump has been accompanied
by a spike in lumber prices in response to supply that
is unable to keep up with demand, International WOOD
MARKETS Group’s May issue of WOOD MARKETS Monthly
is forecasting a similar lumber price spike to occur
around 2011 (or earlier), at which time annual prices
will soar and weekly prices will become highly volatile.
“The housing cycle slumps of 1987–91 and
2005–08 are somewhat similar in that both corrections
were long,” said Gerry Van Leeuwen, Vice President,
“but this current one will have 3.5 times the
single family housing start declines (-1,076,000 versus
-306,000). The up-cycle in 1991–94 involved a
gain of 358,000 single family housing units, while IWMG
is predicting a gain of about 400,000 units over a similar
three-year period between 2009 and 2012.”
With similarities between these two housing cycles,
if the 1991–94 total increase in prices of US$155/Mbf
is applied to the expected U.S. housing recovery period
of 2009–12, then annual average prices of about
US$400/Mbf can be predicted (and this may be conservative)!
“The North American structural lumber and panel
business is also in the midst of a significant structural
change, rather than just another housing cycle,”
said Russell Taylor, President, “and the current
housing downturn will create a template for potentially
unprecedented lumber-price increases as we get closer
to 2011! Developments occurring in other global regions
are also expected to impact timber and lumber supply,
creating more upward momentum on lumber prices. As a
result, soaring lumber prices are expected once the
housing recovery kicks in during 2010 where lumber prices
could eventually spike up to US$500/Mbf – but
not until 2011.”
International Wood Markets Group has over 15 years
of experience in forestry and wood products consulting
and is recognized internationally as one of the leading
publishers of ground-breaking global wood products analysis,
research and forecasts.
Source: Structural Building
Components, May 15, 2008
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