Monthly Archives

October 2012

Market Update: October 16, 2012

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Positive Housing Numbers

Mike-Dykstra-SmallThere is a lot of positive news in the housing sector lately. Single-family mortgage originations have increased in the last three quarters. Mortgage defaults are down to almost the level they were in 2004. In 2011, residential investment was only 2.5% of the total U.S. GDP; from 1980 to 1999, it averaged 5.3%. The housing industry can only increase as an industry, right? It seems like it is finally happening, after 6 long years of a downturn. Housing starts are up approximately 20% year over year, and the forecast for 2013 and 2014 continue to build on that momentum. In our market area, we are trending along with the nation at a 20% increase in permits, when including Grand Rapids, Kalamazoo, Lakeshore, and South Bend markets.

 We are preparing our organization to better serve you as business for all of us increases. We have begun a second shift in Zeeland for building loads so that we are better prepared to meet your delivery needs. We are building wall panels and trusses on two shifts at our truss plant on Clay Ave. in Wyoming. We have recently implemented a new computer software system. This is to better serve you in the future. We are building an organization to continue to meet your needs as our industry ramps up to meet the next wave of housing demand.

Market Update: October 2, 2012

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Lumber and OSB Prices Starting to Level

HerkOver the last few weeks the lumber market has started to show some stabilization in pricing. The futures market, which can be an indicator of what the market could do in the  next year, has shown signs of a flatter price through next May. This does not necessarily mean that this will happen, but it gives us a reason to feel that we have at least reached a top in this market. Some other reasons to feel this way are there seems to be enough wood in the pipeline to cover existing jobs and lead times at mills are not unreasonably long. Also, winter will inevitably be upon us and that thought alone will put a mental damper on lumber usage in many buyers’ minds. So price your jobs using today’s pricing but don’t discount the lumber based on any thought that prices will erode.

The same is true with OSB. The exception is that mills can, and will, manipulate their order files due to the amount of loads being sold on a contract price formulation. The idea is to keep the ‘Random Lengths’ publication’s market prices up in order to base contract pricing on them. Simply, mills will use threats of shutdowns, log shortages (real or imagined) and any other plausible rumor in order to catch a purchaser that is willing to buy at a higher price. Finding enough of these in a week allows the mill to report a sales price to this publication and then sell the following weeks contracts based on that published price. Thus, many times OSB prices are held up in a thinly traded market so when it corrects it can be a volatile price correction. I am starting to feel that we may see that happen in the next few weeks. I should know more by the next market update. However, for the next month (if not longer) expect prices to remain high. In your pricing don’t plan for a correction and if it comes it will be a bonus.

Have a wonderful fall!