Lumber prices normally drop to their lowest levels of the year about now, but uncertainty about future demand has combined at times with the credit crunch to keep lots of LBM dealers out of the market, two executives from a Chicago-based lumber wholesaler say.
"With lumber prices where they are, a yard with confidence as to where the market is going in the first quarter would definitely be buying inventory," Mike Wisnefski, vice president of business development at Bloch Lumber Co., told ProSales. "But they don't know."
That hesitancy relates directly to the housing slump. The Census Bureau reported today that building permit issuances fell 8.3% in September from the month previous to hit an annual rate of 786,000, while housing starts shrank 6.3% in September from August to reach an 817,000 annual rate. That's the lowest rate for starts since January 1991.
Some dealers responding to a recent ProSales survey said that the slowdown in payments they're getting from builders has made it more difficult for them to have cash available for picking up bargains. In addition, about one in 10 dealers said in the poll this month that their bank has reduced or cut off their credit line since Aug. 1.
"Uncertainty for the future affects 100% of lumber dealers," Bloch Lumber president Gregg Riley said. "Access to credit affects a smaller percentage."
Wisnefski said the current problems also are likely to provoke volatility in lumber prices. Historically, these are the weeks in which lumber prices are the lowest they'll be all year. The lack of demand today will depress prices now as well as encourage even more mills to close, he said. But come spring, if there's any pickup in housing, both dealers and lumber mills could face a sudden shortage of building stock. That demand could cause prices to shoot up.