By: Bill Wallace, President and CEO of Big C Lumber
As we begin another year in the building material business, we are still fighting some strong headwinds that will continue long into this year. I have read many industry articles about predictions for 2022 and here are a few that all seem to agree on.
First, the unreliable material supply will continue. We collectively spent more time sourcing and tracking material in 2021 than ever before and that will likely continue throughout 2022. Commodity pricing will continue to be unpredictable. As I pen this article in early January, lumber futures have risen 95% in the past five weeks and shows no signs of retreating. Sitting at over $1000 per board foot, it is still a far cry from the high mark of $1700 per board foot we hit last May. While I doubt we see that level again, I thought the same thing last year and look what happened. We continue to strongly urge our professional customers to protect themselves with escalator clauses, or other ways to preserve their profits in an unpredictable market. While these were unheard of in the past, they are being utilized and accepted by many in our industry these days.
Mortgage rates will go up. While at historical lows, even a small tick upward may take thousands out of the market. Many in their first years of home buying haven’t seen rates over 4%, while my first mortgage was 14%. Interest rate hikes, inflation and a smaller bond buying program by the feds are a recipe for higher mortgage rates in 2022.
Finally, most still believe that housing inventory will be tight again in 2022. Fueled by a strong economy and labor market, housing will remain strong but not as intense as last year. According to the National Association of Realtors, the United States is between 5-6 million housing units short which will continue to support rising prices, just not as quickly as the rapid increase totaling 20% that happened in 2021.
While much of this is troubling, it is still widely believed that 2022 will be another good year for the housing industry, we will all just have to work a little harder to support it.
Until next time…