Would that Wood Prices Wouldn't

I had tea yesterday with Thea and Howard — always a great pleasure!  As we talked about my project, they mentioned seeing a condo development near Columbus, Ohio, on which work had been halted in the middle of construction.  The builder probably ran out of money or credit or buyers (or all of the above) when the housing market came unglued.  After a couple years standing open to the weather, these buildings are surely ruined, not to mention all those who were working on them.

The ripple effects of the residential construction downturn touch almost every corner of the country and economy.  Consider wood.  When builders stopped building, the demand for wood products fell.  As a result, building supply firms cut back on inventory... mills curtailed production and laid off workers... smaller mills closed... no one needed lumberjacks out in the forest to harvest trees... small town restaurants were left with no one to feed... people without jobs lost their houses... and so on.  Surprisingly, this yielded an increase in the price of wood products last year as supplies tightened, commodity traders bet on a recovery, and reduced competition allowed remaining mills to raise prices.  That trend has eased a bit.  Last Friday, June 25, the Random Lengths web site [www.randomlengths.com], which tracks information for the forest products industry, reported the following regarding framing lumber:

"Prices continued to soften across the spectrum of framing lumber species and grades.  An improved tone was evident Thursday in some species, after cuts in prices persuaded some buyers to cover needs.  Nonetheless, a bearish tone prevailed, given weakness in housing and the overall U.S. economy.  Traders' concerns were widely evident following the Census Bureau's report that new home sales in May fell to an all-time low.  Despite recent curtailment announcements, traders widely judged the market to be overproduced."

Framing lumber (a composite of 15 products, such as 2x4s) was down $10 from the previous week, but up $18 from the same week in 2009.  Structural panels (plywood sheets) were down $2 from a week ago, but $76 more expensive than at this time last year.  Framing lumber and plywood represent most of the wood used to build.  At the end of the first quarter 2010 these price increases had added $1-2,000 to the cost of a typical house.

If this seems arcane, consider how many industries, professions, and individual businesses make their living off residential homebuilding.  The latest issue of Consumer Reports features "Classic Kitchens for Less."  Major components in this one room include cabinets, countertop surfacing, ceramic tile (for the backsplash), plumbing fixtures, flooring, and appliances, plus the ministration of plumbers, electricians, carpenters, and those companies which design, build, ship, supply, and install all this stuff.  So, I wonder, how will our economy recover if the housing industry remains stuck in a ditch? •••