Can someone explain to my why supply cannot catch up with demand?

Are mills intentionally holding back supply?

Oh yeah that's right. Hurricanes/weather

https://www.wsj.com/articles/lumber-prices-are-soaring-tree-growers-miserable-11614177282?mod=lead_feature_below_a_pos1

So what is it going to take to catch up?

Prices dipped in Dec then ran right back up and now at all time highs during the "offseason".

I had heard covid and hurricane reasoning but why did it drop in dec then? Housing never slowed down then....Im wondering if there isnt some games going on with supply being held back similar to what opec is doing with oil.

Yes of course with all of the above......you could also throw shenanigans into the mix.

What causes it to slow down? Interest rates going up. Getting people out of remote working and back to office....time?

However, with the move to the suburbs being a real thing, and with credit card debt down, and personal savings up......you could also see it may take 2-3-4-5 years to catch up.

Hopefully someone else can give more insight....I'm interested to learn more. Thanks for the topic

Like putting a choke in a gas well. Why sell at $2 when you can sell at $3

Supply and demand mostly. Demand is high and not slowing.

Also I input costs for mill operators are rising. COVID precautions will cause a mill area to go into quarantine. Right now the mills I am talking to are staffed at 130% because when exposures happen they lose quite a bit of stuff. Even with the extra staff they are producing below capacity because the replacements aren't good at their jobs.

Also they are staffing extra people to clean and spending more on PPE and cleaning

I am building a custom home. Had planned to break ground in July 2020 but got delayed and thinking April 1 groundbreaking now.

Price of our build has increased 30%+ in that time. We've been told "waiting it out" may not work out because either prices may not come back down in the next couple years or they may increase even more.

We were in the same boat. Unfortunately we had to postpone building the custom home and went with an older suburban home. Either lumber will go down or all home values will go up, we didn't want to get caught way overpaying.

Orlando Ayala Cant Read said:

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I am building a custom home. Had planned to break ground in July 2020 but got delayed and thinking April 1 groundbreaking now.

Price of our build has increased 30%+ in that time. We've been told "waiting it out" may not work out because either prices may not come back down in the next couple years or they may increase even more.

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We were going to build a new home via Highland in FW. Price jumped $80,000 in 3 months (over 20%). I'm glad we picked the "certified pre owned" home instead (less than 2 years old and had all the bells and whistles of a new home) and saved about 30% in costs.

If we had more money in savings, we would have continued like you would be doing as the home was a better long term investment, but we are very happy with what we have now. Good luck!

Insurance rates are going up too just for the increased cost to rebuild. Crazy.

Champ Bailey said:

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Are sawmills similar to refineries in regards to facing a bunch of high environmental restrictions to build more?

Seems crazy that there is higher supply than ever, yet because of the choke point, we are paying these sky high prices.

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It's not just cutting the lumber. It's drying it too. You need to build kilns

Building more mills and kilns also means capital investment in a short term trend. High prices are not a problem for mills, and increasing supply will decrease prices. The first question becomes, "Will a new mill pay for itself and the opportunity cost of investment in the volume increase it offers?" The second question is, "What do you do with the excess capacity when prices return to normal? What are the long term maintenance costs?"

Mills could easily just continue to capitalize on the current environment and stretch it out without the risk of spending capital and hoping that once new facilities come online they can recoup the cost and continue to make money on their new mills. There's little incentive to make a capital investment and incur permanent equipment/facility upkeep costs for what is essentially a short term shortage. Even if the new mills and kilns ran after the shortage, you're just increasing supply and depressing your long term prices.

Cactus Jack said:

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What are the barriers to entry in terms of tree cutters/farmers building their own mills? Seems like an opportunity for some forward integration.

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It depends. Most modern mills are large, industrial operations that use a lot of computerized equipment for high efficiency. Much of what they do is automatic, and they're using every part of the log for something. Even sawdust and bark are utilized for particleboard (sawdust), burning for heat (for kiln drying or power generation), or landscaping material (bark). Other unusable parts are turned into OSB, other lumber products or sold to paper producers. That all requires equipment beyond just the saws to cut dimensional lumber, though. The investment could easily be in the mid to high 8 figures for an industrial operation doing several hundred thousand to a million or two board feet per day.

I doubt anyone has the money just laying around to build a mill and kilns for a large commercial operation. If you're doing it, it's with borrowed money and a very long term proposition, so you need to how what you're doing and be able to prove that to a bank/investors. You also need to be committed for the long haul to pay off loans and investors which means running an operation that is competitive even in normal markets. With the efficiency of modern mill operations, that will not be cheap or easy.

Orlando Ayala Cant Read said:

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I am building a custom home. Had planned to break ground in July 2020 but got delayed and thinking April 1 groundbreaking now.

Price of our build has increased 30%+ in that time. We've been told "waiting it out" may not work out because either prices may not come back down in the next couple years or they may increase even more.

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I am in the same boat....trying to time any drop

no end in sight

Time to get back to stripping the rainforests.

Great summary.

To add to it, you could build a cheaper scaled down operation that makes money right now due to high prices. But, you probably won't get it finished and producing before prices come down. The second prices drop, those modern facilities will eat your lunch and you'll be stuck paying the note on a sawmill that loses money on every board it produces.

It's a lot more complicated than that. This is only rough cutting lumber. The 2x lumber you get from a big box store has been rough cut, kiln dried, planed to uniform measurements, and graded. This also doesn't address sheet goods. OSB requires a lot of special equipment to press and glue wood together. Plywood requires equipment to essentially peel a log into a thin veneer or layer and more to press and glue those layers together.

This equipment is more suited for farmers and ranchers making fences or rough structures or hobbyists who are making their own hardwood lumber for things like furniture. You'd never be able to make this commercially viable for structural dimensional lumber even at today's prices.

Supply issue has been covered well by several posters - the other issue at play is inflation as your Federal Govt. is printing money at an unprecedented pace and handing out trillions of dollars to save us from CV-19. Taking the family out for fast food will be $100.00 soon, when it was only $20.00 a few years ago. Seems intentional and sad what they are doing to the DXY....so take steps to protect yourself (BTC).

Good article on why sawmills aren't going to come online to meet demand.

https://www.wsj.com/articles/despite-lumber-boom-few-new-sawmills-coming-11621243982?mod=flipboard

Bitcoin not looking so good.

Just shaking out the weak hands. Good buying opportunity, if you did not get in <$20K per coin.

ABATTBQ11 said:

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Good article on why sawmills aren't going to come online to meet demand.

https://www.wsj.com/articles/despite-lumber-boom-few-new-sawmills-coming-11621243982?mod=flipboard

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I can't read the full article but as the first part mentions: why run at full capacity when people will pay 2x the price for the same amount of work.

I'm in commercial construction. Projects are kicking off and owners are paying the inflated lumber prices. Very few projects are on hold due to lumber prices. According to framing contractors I work with, who are booked out with projects, there is no end in sight until customers say no to projects. This is not happening. We're in a situation where projects have been planned and some on hold due to covid and now everyone is wanting to go full speed ahead. Lumber prices are likely here for good. Construction in central Texas is still booming with not many signs of slowing down.

This is my opinion and like to hear any others. I hope I'm wrong and prices go down but I'm not seeing it and framers have said the same.