May 2012 Market Report

The lumber market remains in a state of balance as moderate sales are meeting an ample supply. Dealers are remaining on the sidelines, ordering just enough for prompt shipment to keep their inventory afloat and mills are producing only as much as they can justifiably estimate will turn. Threats of tight log inventories due to posted roads and a surplus of chips (due to chip-mill closures) are quelling some production but, for the most part, not enough to have any significant impact. Overall, however, the trade is in a relatively bullish frame of mind. Despite a historical relaxing of the market in early April, pricing has remained more firm than usual as there is confidence that order files will hold fast throughout spring and that business will actually tick-up, and potentially in a swift manner. Many traders are warning of the threat that this market “can turn on a dime”, with the connotation that it will move upward very fast if there is a slight jar in the market. As the building industry continues to crawl out of its slump amidst and despite mixed economic news, the potential that that could happen seems more likely than ever.

Whether or not one chooses to be a bull or a bear in this market depends on what you believe are the contributing factors that indicate growth (or lack thereof). Job growth is a major indicator for us as it signifies the potential of future home ownership, and any positive news is taken seriously. One such positive example is the announcement of the U.S. Labor Department on April 5th that, according to March’s unemployment benefits numbers, “weekly applications dropped 6,000 to a seasonally adjusted 357,000…the fewest since April 2008” (Rugaber, AP 04-06-12). The unemployment rate generally gets adjusted when unemployment applications drop below 375,000, so news that a reduction in applications is encouraging. In addition, the unemployment rate has dropped from 9.1% in August to 8.3% in February, the lowest it has been in three years. As a result, analysts have reported that the retail sector has recently grown revenue 4.1% and consumer spending increased in February to the highest level in seven months. Building material suppliers in particular have enjoyed the recent spate of home improvement expenditures, a large portion of which were postponed due to the recession.

On the flip side, the bears may not be quite so willing to accept that happy days are here again as negative economic articles seemingly appear across the page from every positive one. For instance, shortly after the announcement by the U.S. Labor Department that unemployment applications were on the decline, the Bureau of Labor Statistics announced that a fewer-than-expected increase of 120,000 jobs were added during the month of March, setting off fears and concern that we could be seeing the start of a new trend of a plateau or decline in job growth. On top of the alarmingly fast rise of the cost of fuel, the lack of growth in the job market would make one reticent to invest or spend, further curbing any additional economic growth. Positive and negative comparisons can be made against a large variety of economic factors, but the lingering damage of the recession keeps a cloud over the fact that a speedy economic recovery is still at bay.

However, due to low mortgage rates, low property values and the cheap price of lumber, it is still an ideal time to build, buy or remodel a home and wise investors are savvy to that. In spite of the recession, the American population has continued to grow and live longer, exacerbating the need for housing. Due to the impact of lost jobs and homes during the recession, rental properties have escalated along with rental fees, but it is once again becoming more feasible and less expensive to buy or build a home than it is to continue to rent. As the job market grows and housing inventories decline, the need for building will grow and those who can see the value will continue to invest in the wonderful real estate that only Cape Cod can offer.

As always, you can rely on Shepley to be your consistent building materials supplier. If there is one thing that Tony Shepley has instilled in all of his employees, it is to strive toward excellence and deliver exceptional service and quality product on a consistent basis. Based on that premise, we can assure you that we have the quality wood at competitive prices that will help you exceed at your job, and we look forward to the opportunity to serve you. If you have any questions or concerns regarding your project, please be sure to contact your sales person. Thank you for your business.

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