Lumber Market Report - October 2022 | Shepley Wood Products
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Lumber Market Report - October 2022

With the housing market in a recession, lumber buyers have been practicing restraint with their purchases as they try to evaluate the direction and extent of upcoming demand. According to a recent article in the Random Lengths Weekly Report, “Months’ supply of new homes climbed to 10.9 in July – the highest reading since March 2009 and more than triple the August 2020 low of 3.3.” With sales of single family homes hitting their lowest level in six years (largely attributed to rising interest rates and inflation), plans for a strong end to the year appear to be evaporating on the whole with the exception of our territory, which is still quite active. Although lumber prices have been coming down over the past few months due to a weakening demand, a mid-month announcement that a potential railroad strike could occur quickly changed the tone of the market as buyers became spooked at the threat of once again having supply chain issues (and major ones, at that: approximately 30% of U.S. freight is transferred by rail). Thankfully, the strike was averted but the impact of that threat briefly heated up the market and helped to accelerate the end to the price slide, which was already underway through the efforts of the lumber mills who have been steadily reducing production. As of print, supply and demand are in equilibrium and lumber prices have firmed as supplies have tightened. As October is typically the start of the fall building season (contractors strive to get their projects up and weathertight before inclement weather hits), most are anticipating a pop in business and for prices to moderately climb as we progress through the month.

After more than two radical years of dealing with exceptionally high demand and its subsequent supply chain and labor shortage issues, it’s apparent that the “party is over” but the hangover of high prices remain for most items. As interest rates have increased and inflation is forcing budget-conscious consumers to think twice on major expenditures, prices are mattering much more than they did just a few short months ago. In that vein, prices have never stopped mattering to us and they have become even more of a hot topic with our suppliers of late. We understand that inflation, costs of raw materials, transportation and labor costs are burdens that any company must bear and adjust to, but many (in and out of our own industry) showed no mercy when it came to passing on price increases, especially during the more turbulent moments of the pandemic. Although the percentages and frequencies of the increases were often alarming enough, the length of time that quotes were honored was often even more disturbing. It was not uncommon to be quoted a price that expired by the end of that week or even the end of that day. Even worse (and our very least favorite) was “PTS” for “priced at time of shipment”. In this industry, with the abundance of quoting that is required to pull together budgets, how is any contractor supposed to take a quote that expires that day, that week (or be based upon whatever unknown number is deemed the cost when it ships) and pull together an accurate, competitive budget for their customer? Contractors know the answer all too well. They have to regretfully inflate their budget or risk losing money on the project. On the global scale, putting home builders in this position makes matters worse for us all as, either way, it over-inflates the cost of building a home (driving potential home-buyers away) or causes financial harm to our customer, the contractor, who must bear a loss if they go over budget. Conducting business comes with risks for both sides. It can’t be one-sided, most especially when dealing with loyal customers in a volatile economic climate who depend on you. That is why we never changed our 30 day price expiration on our lumber quotes or abruptly posted extreme price increases, regardless of what was going on in the industry during the pandemic. Now that the market is turning, many of these same suppliers who used short-term/no-term quote tactics are nervously reaching out to reestablish relationships, looking to ensure that they will have a piece of our future business. To that effect and from our own position, they are being put on notice that the suppliers who helped us protect our customers from price instability during the pandemic will be awarded with our support in the future, and that price decreases in the face of a weakening market are anticipated. To us, the customer-supplier relationship is a partnership, and being consistent and fair in every facet of business, including pricing, is paramount to maintaining that partnership. It is antithesis to our core values to do otherwise. For our suppliers, we simply expect the same and are extremely grateful to the many that have chosen to work with us as respectable partners through thick and thin.

We value your business and realize that it’s a distinct privilege to be your supplier of choice. Although at times during the pandemic it was really painful for the both of us, we hope that you agree that we have strengthened our relationship by consistently doing what we say we will do, which is working toward our mutual success. Thank you for your business!