New construction is a surging trend here in Bozeman. With this surge, there is a sharp rise in the cost of lumber. Analysts are watching this commodity in order to try and predict if this sharp spike will hinder the recovering housing market.
For the past six months, the US housing market has seen a steady and consistent strengthening (based on data from S&P/Case-Shiller home price index). This recovery is still fragile. The industry’s profit margins are still relatively low averaging a mere .03% net margin on average. There is still a long way to go before the market can handle the volatility of the commodity markets that support it. New home building demand is rising putting pressure on the chain that supplies it: raw materials, labor, time, and equipment.
A few experts weigh in:
"A lot of it has to do with the wood as a commodity itself and the inability to differentiate," Granado,analyst with financial analysis firm Sageworks, says.
"This is an industry that has been in need of a price increase for a very long time. Excess capacity and competitive pressure Asia has made this difficult," said Dan Natkin, director of Mannington Mills' hardwood and laminate business. "We have reached a breaking point where we have to raise prices."
Hart Real Estate Solutions