[HN Gopher] Soaring lumber prices add to the cost of a new home
___________________________________________________________________
Soaring lumber prices add to the cost of a new home
Author : endtwist
Score : 66 points
Date : 2021-04-30 17:37 UTC (5 hours ago)
(HTM) web link (www.cnbc.com)
(TXT) w3m dump (www.cnbc.com)
| ineedasername wrote:
| As the article notes, much lumber production shut down believing
| COVID would significantly impact demand, but that was really not
| the case except for a very short period of time.
|
| In my area in particular, I live outside of a city hit hard by
| COVID, and that had lots of workers who could transition to WFH.
| The combination means that city dwellers have flocked to the
| local suburbs in _massive_ quantities, often buying up the
| cheapest houses & either immediately expanding them or simply
| knocking them down completely to rebuild from scratch. As a
| result, not only is it difficult to find local contractors
| available for even minor home improvements, local property values
| have spiked as much as 30% over the last 14 months. This has been
| greatly assisted by mortgage interest rates that as incredibly
| low-- I just refinanced and saved about 20%/month on my mortgage
| and an overall $50,000 saving over the life of the loan.
| aazaa wrote:
| > Some builders have said they are slowing production in the face
| of exorbitant costs, but single-family housing starts were up 41%
| in March year over year, according to the U.S. Census. Builders
| are clearly trying to ramp up production as fast as they can to
| meet soaring demand.
|
| For the next several months we'll be in a period of _base
| effects_. That means that year over year comparisons are going to
| look alarming.
|
| Think back to what was happening one year ago. The economy almost
| completely shut down. Return to "normal" is going to give a lot
| of weird readings.
|
| Articles like this should point this out, but don't. They should
| note, for example, the % drop in single-family housing starts YoY
| for 2020 for comparison.
|
| The article hints at the phenomenon, but fails to actually
| quantify it. This leads to a more sensationalistic article that
| might attract eyeballs, but does a poor job of informing.
| throwaway1777 wrote:
| You're not wrong about housing starts, but as far as the lumber
| prices goes it's not a base effect. The price was already
| increasing pre-covid and covid shutdowns accelerated the trend.
| omgwtfbyobbq wrote:
| From what I've heard, this is mostly a function of...
|
| 1) Lumber mills shutting down because of weak demand and tariffs.
|
| https://www.woodworkingnetwork.com/news/woodworking-industry...
|
| 2) Curtailment of remaining production because of coronavirus
|
| https://www.woodworkingnetwork.com/news/canadian-news/corona...
|
| 3) The housing market going a little nutty
|
| https://www.vox.com/22264268/covid-19-housing-insecurity-hou...
|
| 4) I imagine record low interest rates also contributed
| ortusdux wrote:
| Also:
|
| - WFH people fleeing high COL cities, buying fixer-uppers, and
| paying whatever to renovate
|
| - Rolling covid shut-downs of companies that make wood products
| like OSB glue or treated wood chemicals
|
| - Freight costs
|
| - Trailing effects from a bad fire season and the Texas ice
| storm repairs
|
| - Tariff repercussions
|
| - Russia is planning to stop exporting raw logs next year. They
| are about 12% of the worlds supply.
|
| - Speculators profiting off the volatility
| jdhn wrote:
| >- Russia is planning to stop exporting raw logs next year.
| They are about 12% of the worlds supply.
|
| Why would they do this? Is this a way of getting back at the
| US for sanctions? Seems like they're shooting themselves in
| the foot.
| dragonwriter wrote:
| > Why would they do this?
|
| Raw logs are an input; it drives up the price for external
| industries dependent on lumber and drives them down for
| domestic industries, sacrificing raw material exports for
| more competitive intermediate and finished goods exports.
|
| Since for the most part economic development depends on
| having exports as far toward the finished goods end of the
| raw material to finished goods spectrum, its not an insane
| strategy if you can deal with the short-term dislocations.
|
| _Shifting_ competitive advantage is harder than leaning in
| to your existing competitive advantage, but sometimes your
| existing competitive advantage is a long-term loser.
| kokanator wrote:
| Does it feel like we have squeezed a critical part of our
| infrastructure here allowing it to close down or go bankrupt?
| This could have lasting affects for decades.
| xiphias2 wrote:
| So basically people in the US voted for higher prices, so that
| they can keep their job that can't compete on international
| markets, and they got what they voted for.
| epicureanideal wrote:
| So about 0.3% of the price of an SF Bay Area home?
|
| At least in this area, the price has a lot more to do with
| NIMBYism than the cost of materials.
| [deleted]
| hippich wrote:
| Problem is - lumber prices are about the same across the
| country. In SF Bay area and some middle of nowhere, where such
| lumber increase makes a significant difference.
| throwaway0a5e wrote:
| Lumber prices are not the same nation wide because lumber is
| not thaaaaat expensive to manufacture per volume/weight so
| shipping costs to get it from mill the mill to the end user
| are a larger and larger portion of cost the farther from the
| mills you get.
| hippich wrote:
| I just compared prices of 2x4 and construction grade
| plywood between Lowes location in SF area and Austin area.
| They are pretty much the same. I agree, distance from the
| mill will matter, but not to a significant degree (not 3
| times for sure)
| akiselev wrote:
| IME big box store prices are 2-3x that of a real
| lumberyard for low volumes. I don't think they're
| reflective of the rest of the market, especially at high
| volumes. When you're talking an order of 100 or 1000+
| board feet from a lumberyard, it's a completely different
| story. I've had situations where the last mile delivery
| fee alone was 25% of the cost, not including the cost to
| get it to the lumberyard in the first place.
| ComputerGuru wrote:
| That's besides the point. Divide both numbers by 2-3x and
| the argument stands.
| ixacto wrote:
| This is the real problem IMO. We need more dense condos like
| Chicago, where the median condo price is 268k versus other
| large cities where it is almost double that.
|
| This is just people being taking advantage of their
| housing...investment/tax shelter/savings plan that is bidding
| the price up.
|
| Look at something like this zero red flags that I can see for
| $219k that is much cheaper than in most other large cities,
| housing doesn't have to be this expensive.
| https://www.redfin.com/IL/Chicago/1706-W-Huron-St-60622/unit...
| almost_usual wrote:
| Condo prices have gone down in the Bay Area since COVID. The
| problem is everyone wants a SFH suburban lifestyle in the
| Peninsula, Marin, or East Bay hills. That's a luxury and
| you're going to pay a premium for it.
| epicureanideal wrote:
| But are still EXTREMELY expensive relative to most of the
| US, not because of materials costs.
| braunshedd wrote:
| There's essentially no new housing being built in the Bay in
| general, so I suppose the cost of lumber is moot.
| teoruiz wrote:
| Honest question: why are houses in the US primarily built with
| wood? Is it just because it's cheaper?
|
| Even if it's cheaper, is it worth to have a cheaper but obviously
| less durable building when compared to brick and mortar?
|
| It's always been baffling for my southern European mind.
| QuadmasterXLII wrote:
| At least in my area, brick houses are actually less durable
| because they crack on our shifty soils
| cigaser wrote:
| Relic from boom after WW2, many houses needed to be build fast.
| rsanheim wrote:
| It goes up much quicker and requires less highly skilled
| tradesman to build and to maintain.
|
| There are new developments in the states where they produce the
| frames for the various housing 'templates' off-site, and then
| ship it to the plots and build the house there, almost like a
| lego kit.
| Gibbon1 wrote:
| Depends on where you are in the US. There are a lot of brick
| and stone buildings in the northeast. Florida because of
| hurricanes they tend to build houses out of cinder block. In
| California because of earthquakes they tend not to build with
| masonry.
|
| That said the US historically had a lot of wood. Most
| everywhere. So it was cheap and light[1] easy to transport. And
| wood if it's kept dry is durable. My house is 70 years old. The
| wood framing is totally solid. Previous house is 115 years old.
| The framing is also solid.
|
| [1] House built of wood is probably 1/4 the weight of a house
| built of masonry.
| diydsp wrote:
| For my gf (in the usa), it's aesthetics. Though I look at brick
| and think "longevity." Perhaps historically it was
| cheaper/easier to use local wood and that image stuck with
| people?
| kps wrote:
| A wood frame is much better in earthquakes; it just happily
| flexes. Steel is an alternative but until the plague was more
| expensive than wood.
| antisthenes wrote:
| I wonder how these prices factor into the regular inflation
| calculation.
|
| Even last year, when I was buying lumber from Home Depot, they
| cancelled parts of my order, raised the price on certain items by
| almost 20% and never added them back.
|
| I had to fight them for a week and it took over a month just to
| get a fairly modest amount of lumber delivered.
| tamaharbor wrote:
| Sheet of plywood last year = $8, this year = $54.
| braunshedd wrote:
| If we're using anecdata, I've seen $20 plywood sheets going for
| $40 which is double the normal price, but not 7x.
| omgwtfbyobbq wrote:
| I think it depends on region. I've heard of $20 sheets going
| to $70+ in California, and I could see someone who is close
| to production in Oregon seeing an increase from <$10 to >$50.
| panzagl wrote:
| Where was a sheet of plywood ever $8? Even a sheet of masonite
| has been over $8 for years...
| mindslight wrote:
| What are the specs on this "sheet of plywood" that was $8 any
| time within the past decade? Maybe some crappy OSB? Or one of
| those precut 2x2 panels?
| solomonb wrote:
| 7/16" OSB went from $8 to $55 in Los Angeles. ACX is around
| $75 now.
| mindslight wrote:
| Rough.
|
| I'm just sitting here wanting to build a new desk and some
| shelves, like I guess winter is a better time for projects
| anyway. Although I haven't actually priced plywood in my
| area yet, maybe the nice stuff has gone up comparatively
| less.
|
| (and maybe LA will finally learn how to make multistory
| buildings out of something besides wood?)
| solomonb wrote:
| These prices are nationwide (and apparently
| international?). I think it is worst for construction
| grade material but I haven't called a real lumber yard to
| get prices on hardwood or cabinet grade plywood.
|
| I was going to build a greenhouse out of poplar but noped
| out of that design and went with a hoop house made from
| bent fence posts.
| andrewmcwatters wrote:
| I don't know what the risk calculus is for these home developers,
| but I do know that in particular areas of the US, you just
| straight up cannot afford a home anymore on median income (or
| even the top 20%ers looking for fair pricing!).
|
| I anticipate that mortgages will continue to push past 30 years
| into a strange 45-year+ territory, and we'll begin to see Japan-
| like multi-generational mortgages. Actually, in reality this is
| already happening, because people buying homes past the age of 37
| (think retirement at 67, but these people are still working and
| trying to figure out estate handling late in the game) are
| passing on their mortgage to their children. I am personally
| seeing this with my friends. No headroom for paid off
| inheritances!
|
| Alternatively, if the federal government does not prevent it from
| happening, residential REITs will buy them all up and force
| people to rent.
| gnopgnip wrote:
| High prices in some areas is about the price of land and not
| about construction prices.
|
| Residential REITs need to profit when they buy a house. An
| individiual homeowner doesn't, they can pay more if they want
| to. And individual homeowners get subsidized loans, and in many
| states subsidized property taxes, they can have a much lower
| monthly payment, and afford to offer a higher sale price. So
| for move in ready homes, the seller will almost always go with
| an owner occupant.
|
| The real problem is with investors buying homes that aren't
| move in ready. Rehab loans are expensive and risky, individual
| buyers can't compete with investors, and the sellers are the
| ones with the short end of the stick.
| Workaccount2 wrote:
| The financial/economic forest is way overgrown and no one wants
| to be the one to set it on fire.
| andrewmcwatters wrote:
| I agree. Politicians have weak incentive to push back I
| assume?
|
| If you do, you put average people at REITs out of work. This
| isn't a terrible thing if you ask me, because not much of it
| is real estate specific. REIT HR people can find work at
| other companies, developers and salespeople, too. But it's
| not a good look, I suppose?
|
| Real estate is a real problem that no one seems to want to
| touch. "The rent is too d*mn high!"
| tryptophan wrote:
| REITs are not the problem. Land speculation is the problem.
| Worst part is that the gov promotes this, and voters eat
| that shit up as well("Your mortgage is an investment").
|
| https://en.wikipedia.org/wiki/Land_value_tax is the
| solution.
| toomuchtodo wrote:
| A fun question we kick around and model in a financial
| forum I participate in is, "How much insolvency occurs
| economy wide for every 100 basis points (1%) the Fed
| increases their interest rate target?"
|
| If interest rates go up, real estate and equities prices
| come down, and US gov borrowing costs increase. Borrowing
| costs go up for zombie firms and they fail. How much
| appetite is there for any of that? The same as long term
| central back interest rate policy: zero.
| Der_Einzige wrote:
| No, if interest rates go up, the acceleration of real
| estate and equities prices will slow. There are too many
| real factors which are causing the acceleration of
| housing prices for interest rates hikes to totally cancel
| it out.
| reader_mode wrote:
| Interest rate hike would probably cascade to a recession
| blowing up realestate in the process
| paulpauper wrote:
| if home prices keep surging on a real basis , a 30-year
| morttgage becomes attractive proposition, especially given how
| cheap it is to borrow .
| kokanator wrote:
| Does anyone remember this type of home buying craziness is
| what happened just before the bust of 2008?
| nradov wrote:
| Median incomes are irrelevant to housing developers. All that
| they care about is whether there are enough customers to buy
| their products. The developers typically don't lend to
| customers so the only risk is that demand might collapse in the
| middle of a project. A lot of small developers went bankrupt
| during the last recession because they had borrowed to build
| new projects and then couldn't sell the completed homes.
|
| The federal government wouldn't really be able to prevent REITs
| from buying up homes.
| ericmay wrote:
| > The federal government wouldn't really be able to prevent
| REITs from buying up homes.
|
| Why wouldn't it? If this was bad enough the government could
| just pass limitations on it. Hell, the government could
| probably ban REITs overnight if that was wildly popular.
| throwaway0a5e wrote:
| Even if the industry is unpopular there's not that much
| appetite for legislatively killing it at the drop of a hat
| because everyone knows that's not a good precedent to set.
|
| More realistic would be substantially increased taxes on
| non-primary residences.
| pbronez wrote:
| If you want to support individual home ownership against
| well-capitalized REITs, I think you basically need local
| governments to impose some kind of vacancy tax and/or an
| non-owner-occupancy tax. Otherwise individuals will never
| have the financial firepower to keep up.
| sokoloff wrote:
| If that's your goal, you should also support the mortgage
| interest deduction (to put owner-occupied borrowing on
| the same footing as commercial borrowing) and the
| deductibility of state/local real estate taxes on your
| federal return (for the same reason).
| forrestthewoods wrote:
| > but I do know that in particular areas of the US, you just
| straight up cannot afford a home anymore on median income
|
| Correct. The national median income is insufficient to purchase
| a home in the most expensive cities in the country. That seems
| reasonable?
|
| The national median household income is about $65,000. That's
| enough to afford a mortgage of somewhere in the $300,000 to
| $350,000 range.
|
| Is that enough for San Francisco? Absolutely not. But that will
| buy you a nice house in the vast majority of the country.
|
| California has garbage housing policies. San Francisco is even
| worse. You can buy a lovely place in Dallas, Kansas City,
| Atlanta, etc on national median income.
| jbay808 wrote:
| > Correct. The national median income is insufficient to
| purchase a home in the most expensive cities in the country.
| That seems reasonable?
|
| It's not clear if the GP was referring to _national_ median
| income. My interpretation was that they may have been
| referring to local median income. Is the median family income
| of SF ($136k, I think) enough to buy a home there?
| andrewmcwatters wrote:
| People have different definitions of "affordable." To me, a
| gross $65,000 household income, less after taxes, is not
| enough to be able to afford a home within that price range.
| It's probably closer to below $275,000.
|
| I do agree with you regarding location, though.
| DavidPeiffer wrote:
| Completely agree. A lender in Iowa told us they approve up
| to 35% of _gross_ income. Not certain if that was total
| servicing all debts, or their limit on the mortgage
| percentage payment. 65k could buy a ~300k house at a 3.25%
| interest rate.
|
| I talked with an attorney from San Francisco on a plane
| once. When they bought their first house, 70% of their
| income was going towards the house. Raises helped that
| become a more reasonable percentage over the year.
|
| Fast forward a few years, their family grew and they wanted
| to be further towards the edge of the city. They sold the
| house at a huge profit and put that money towards a bigger
| house further out. Different perspective in different
| markets.
| busterarm wrote:
| You should never buy a home that costs more than 2x your
| yearly income.
|
| So yeah, you should make at least $137,500 if you want to
| buy a $275k house.
| smabie wrote:
| I mean that feels pretty simplistic. Like most things, it
| depends.
|
| There are many things that I could know or believe that
| affect the calculus. For example I might get promoted
| next year and make more money or whatever.
| isbvhodnvemrwvn wrote:
| Or laid off, or get into an accident.
| ineedasername wrote:
| In which case the equity you've built up in a house can
| help serve as a cushion, either by obtaining a home
| equity loan or if circumstances don't allow that because
| you don't have a paycheck you can cash out the equity by
| selling the home. Absent on economic downturn, even if
| you sell within the first 1-2 years you should be able to
| roughly break even and then downsize to a cheaper
| apartment.
|
| The only times I see renting as a better economic option
| is when the monthly mortgage + property & utility costs
| are significantly more expensive than renting, _AND_
| there 's an excellent chance of needing to relocate
| within the next 3-5 years before much equity is built up.
|
| At earlier stages in a career, somewhat frequent
| relocations are common. But for a large part of the
| population who, especially as they age into their 30's+,
| want to stabilize such things in the interest of staying
| close to family, or make their own family, a greater
| level of geographic stability is very desirable and can
| be achieved without much if any career sacrifice if the
| location is strategically chosen, and buying a house at
| that stage almost always makes economic sense in the long
| term.
|
| Of course there are some people who will always want to
| periodically uproot themselves every few years to new
| locales, and there's nothing wrong with that either, but
| I guess my point is that these differences in lifestyle
| choices significantly change where the economic balance
| falls.
| Ancalagon wrote:
| by this logic like 99% of people would be priced out of
| purchasing houses in most of california...
| busterarm wrote:
| Yes, exactly.
|
| California has the 10th highest foreclosure rate out of
| 50 states and Los Angeles is 5th for cities with a
| population over 1 million.
| ineedasername wrote:
| You can easily spend more than the equivalent of 2x your
| annual income by renting, in terms of higher monthly
| cost, than by purchasing a home.
|
| Take for example a $300,000 house w/ 4% mortgage. That
| works out to roughly $1,400/month. Even if you only make
| $75,000/year, it makes perfect sense to buy that house
| even if rents are a little lower than $1,400/month. (and
| current 30yr average rates bring that down to about
| $1225/month)
|
| In my area, a small 2 bedroom house in a reasonably nice
| area will cost about $300,000, so the $1225 to
| $1,400/month rate applies. Renting a 2 bedroom apartment
| with less sqft for common spaces, in a similar area, will
| cost about $1800 to $2000. This is significantly more
| than is required to make up for property taxes levied on
| top of the mortgage when actually purchasing.
|
| So I'm really not sure where you're getting your 2x
| figure. That's the sort of statement, absent context &
| explanation, that really doesn't add much to the
| conversation.
|
| (On top of this, apartment complexes in my area have been
| nominally keeping monthly rates the same, but
| disaggregating utility costs from the rent, charging
| separately for heating, water, sewage, and garbage
| collection... at least for a year or two. After people
| get used to those additional fees, the complexes begin
| raising rents again too. I don't blame them too much,
| there's plenty of rental demand, but it changes the
| balance between renting & purchasing even more)
| busterarm wrote:
| Home ownership is more than just the cost of your
| mortgage.
|
| And in many markets, especially in big expensive cities
| like NY & SF, it costs more money to buy than to rent.
| croutonwagon wrote:
| The Federal government has a TON of subsidies for first time
| buyes and even more for veterans.
|
| The issue is part land scarcity driving up the cost of land and
| part the transition of our economy out of production and into
| consumerism.
|
| Building has never been cheaper, and even quality has improved,
| including working through some pretty bad materials changes
| (like PEX plumbing, or chinese drywall).
|
| We no longer really do nearly as much blue collar work as we
| used to, and many of the unskilled blue collar jobs have seen
| ridiculous wage stagnation. Companies have offloaded that to
| China, Mexico, Vietnam, etc, where they havent automated it.
|
| Heck our population doesnt WANT those jobs. Theres a TON of
| demand for trades work and more are retiring than filling those
| gaps, but our society has pushed hard to posit that college is
| the only path to success and trades work is to be looked down
| upon.
|
| Add to that our population has never been higher. In fact its
| growth has stagnated the worst since the Great Depression based
| on the intials of the 2020 Census, which is not a good omen.[1]
|
| https://www.pbs.org/newshour/nation/census-texas-gains-congr...
| [deleted]
| maxerickson wrote:
| I am under the impression that the change to PEX was good? It
| sure was adopted fast.
|
| Do you mean it was a significant change?
| andrewmcwatters wrote:
| Total building costs are more expensive than ever.
| Regulations, IBC, and consumer feature demand dictate it to
| be so. I don't know what you're talking about. Quality also
| hasn't improved, only marginal cost of production of
| materials has dropped. The actually structural integrity of
| those materials has worsened over time.
| colinchartier wrote:
| > Lumber tariffs had prices already rising a year ago, but then
| when the pandemic hit, production shut down. The expectation was
| that housing demand would dry up for a long time. But instead,
| after a brief pause, it came roaring back.
|
| How can this be the case when lumber prices are surging in Canada
| as well? You'd expect that if the price was in response to
| tariffs then the origin country would be flooded with supply?
| spamizbad wrote:
| My understanding is the Canadian government put limits last
| year on how much timber could be cut. So their prices were
| going up no matter what.
| margalabargala wrote:
| Mills are the issue, not timber. There's an excess of raw
| timber right now, all of the wood from the wildfires in the
| PNW last year is being salvaged currently.
| idiotsecant wrote:
| it's not just firewood supplies (not sure how much that
| impacts the market, and the PNW has a more or less
| permanent fire season each year now anyhow) - The market
| has been glutted with raw timber for a decade. There has
| been a huge oversupply for quite a while. This continues to
| today - just because lumber mills are making money hand
| over fist doesn't mean raw timber producers are.
| vkou wrote:
| Marginally profitable mills shut down/go bankrupt when tariffs
| are introduced, and unlike AWS instances cannot be spun up on
| demand.
| kokanator wrote:
| Does it feel like we have squeezed a critical part of our
| infrastructure here allowing it to go bankrupt? This could
| have lasting affects for decades.
| vkou wrote:
| Canadian lumber has always been a political football for
| American politicians to kick around whenever they needed to
| score some points, so we're used to this sort of thing.
|
| Like any resource extraction industry, it goes boom, it
| goes bust, it recovers.
| throwaway0a5e wrote:
| The big bottleneck is mill capacity (as evidenced by the fact
| that timber prices have not increased much). Unexpected high
| demand is driving most of the rest of it. Both of those affect
| Canada as well. Tariffs are only a small part of the overall
| cost increase.
| totalZero wrote:
| If this is the case, then lumber should be backwardated right
| now.
|
| _checks the futures market_
|
| And indeed it is. May trades 40% above Nov on CME.
|
| So if you want to buy a rural house, you can just....wait
| until a couple of years after the pandemic?
|
| I don't know why you would rush to build a house right now,
| unless you want to live in technocrat-favored places like
| Austin and Denver that are seeing demand creation due to
| permanent WFH among Big Tech companies.
| bluGill wrote:
| Production slowed down - less wood was cut. Then demand didn't
| drop as much as expected and so the supply is down a bit.
| adrr wrote:
| Has anyone looked at the cost of food or gas lately? Interest
| rates need to go up. It is beyond stupid that I was able to
| refinance my house at 1.75% on 15 year loan in December. My
| previous loan was 4% on a 30 which already was extremely low.
| It's giving people free money who don't need it. Side effect is
| the inflation that punishes the poor even more.
| garettmd wrote:
| This. I've seen several sectors where prices are going up, and
| everyone always points to narrow causes particular to that
| sector for prices going up. But everyone seems to ignore the
| fact that when you add trillions of dollars to the economy one
| of the most understood results is that it increases inflation.
| lightelement wrote:
| Does inflation punish the poor more? It punishes people with
| savings, and people with savings are generally not poor.
| Inflation also helps anyone with a loan (because that loan just
| got "smaller"), and people with a lot of debt are generally
| poor as well.
| notsureaboutpg wrote:
| I'm convinced inflation is down the pipeline. What can I do to
| come out okay on the other end? Invest in stocks? Genuinely
| asking
| WanderPanda wrote:
| I think it is not yet obvious if it will hit the poor or the
| middle class the most.
| programmertote wrote:
| Anecdotally agree 100% with this. I notice that the grocery
| prices for food that I typically purchase have either risen
| noticeably (by as much as 12% for certain Asian food items)
| and/or are suffering from shrinkflation (e.g., when I make
| breakfast for me and my wife, I was not able to fit four bread
| slices on an IKEA plate that I use at home; but starting a
| couple of weeks ago, the bread slices--same brand and still
| paid the same price of $1.50/bag--now fit perfectly on the IKEA
| plate and this is not just because of the abnormally small
| batch of bread. I have bought bread two weeks in a row to know
| for sure that the sizes have shrunk).
| ineedasername wrote:
| Precisely... my loan was actually too small to qualify for the
| lowest rates, according to research & some friends in the
| business, rates like 1.75% were mostly for $250k+ loans, but I
| was still able to refinance a line of credit we'd used to
| expand out house years earlier to such a lower interest rate
| that we're saving more than 20% off our previous monthly
| payment & about $50k off the total life of the loan (assuming
| we do an extra payment toward the principal every once & a
| while, which we were doing anyway).
|
| Basically if you have a home loan from 2+ years ago & still
| have the same level of steady income, it probably makes sense
| to refinance.
| adrr wrote:
| Why pay off the principle when there are investment grade
| assets that pay higher return than the interest you're
| paying. Not sure what they are now but municipal bonds were
| paying between 3% and 4% last year which is tax free.
| Interest rates being so low is just crazy.
| ryanianian wrote:
| > assuming we do an extra payment toward the principal every
| once & a while
|
| At the risk of veering into financial advice, paying extra
| principle early is almost never a good idea. Instead, put
| that money aside into an investment account and use it to pay
| off the mortgage once the sum is greater than the balance.
|
| Assuming markets beat your interest rate, you'll have a
| higher return and you have the emergency fund in case
| something catastrophic happens. If you pay that to the bank
| you can't get it back in an emergency, and you will only cut
| down on the front-loaded interest--which will likely be under
| market returns.
| MeinBlutIstBlau wrote:
| Line of Credits typically go off of prime which is why you
| didn't get the lowest rate. Most institutions do something
| like prime + x%. If it was a 15 year fixed or 3 year ARM,
| then you most likely would've gotten an awesome rate.
| WDCDev wrote:
| My family moved into our newly built home in the northern suburbs
| of Pittsburgh in Oct. of last year. We were part of the first
| group of buyers in a relatively new plan of higher-end homes.
|
| Since Oct. of last year, the base price of our model has gone up
| $215,000 and every lot in this phase (phase 1) has now sold. I
| suspect at least half of that increase is materials, and the rest
| is due to market demand.
|
| The market is just crazy and in talking to my builder he has said
| supply shortages could last through EOY and into next.
| BitwiseFool wrote:
| The universe is determined to keep as many millennials from
| buying homes as it can.
| Morvan wrote:
| >The universe
|
| That's a funny way to spell government appointed central
| bankers who fix the price of money.
| qeternity wrote:
| You cannot blame CBs. I despise the current monetary policy
| as much as the next person but this is a function of society.
| We have stopped believing in "no pain no gain". We think that
| everyone should be gifted a painless utopian existence in
| which nothing bad ever happens.
|
| Darwinian forces always win.
| idiotsecant wrote:
| I'm not sure you fully understand the experience of the
| typical young adult in this country right now. I'd say the
| phrase 'all pain no gain' is closer to reality. Compared
| with even the last generation (who had it pretty bad
| compared to the generation before them) the opportunity to
| have a reasonable standard of living is greatly reduced.
| agogdog wrote:
| In 1963 my grandparents bought a house on a single salary.
| They started saving when my grandmother gave birth at 16
| (she was also disowned by her family).
|
| So sure, that's anecdotal... but a 19 year old buying a
| house with 3 years of savings from an apprenticeship and
| without any credit or collateral seems impossible to me
| today?
|
| I'm not sure there's an amount of pain available today to
| gain that much. If there is it seems like it would be
| dramatically more painful for the same level of gain?
| paulpauper wrote:
| millennial home ownership rates is only slightly below boomers
| when matched for age
| aschearer wrote:
| Not according to this article: https://www.washingtonpost.com
| /business/2020/01/20/millennia...
|
| "When baby boomers hit a median age of 35 in 1990, they owned
| nearly one-third of American real estate by value. In 2019,
| the millennial generation, with a median age of 31, owned
| just 4 percent... that gap will probably narrow by the time
| they see 35. But they're not likely to reach 30 percent of
| the housing market -- or even the 20 percent attained by the
| smaller Generation X at the same point in their lives."
| aazaa wrote:
| Where do you get that, because this article says otherwise:
|
| > Millennials are less likely to be homeowners than baby
| boomers and Gen Xers. The homeownership rate among
| millennials ages 25 to 34 is 8 percentage points lower than
| baby boomers and 8.4 percentage points lower than Gen Xers in
| the same age group.
|
| https://www.urban.org/sites/default/files/publication/98729/.
| ..
| skit wrote:
| What's even crazier is that the builders are identifying that
| even with the increased price for lumber, demand is still there--
| people are willing to eat the cost. I don't imagine builders will
| be decreasing their prices after there being plenty of lumber
| supply.
| pbronez wrote:
| I recently met with a builder who said exactly this: prices are
| up quite a bit, but he expects they'll be sticky and stay high.
| nfRfqX5n wrote:
| it's likely still cheaper than buying into the overpriced
| housing market right now
| bluGill wrote:
| It doesn't take much to start a construction company. Most of
| them have foremen who are perfectly able to quitting and
| starting their own company. Both the new and existing company
| will hire a few new people (zero experience needed, start today
| at $18/hr - or some wage that gets people in) and so there are
| more in construction overall.
|
| As such builders will try, but once lumber prices go down a bit
| they will probably lower prices to attract customers. Plumbers
| and the like might get a little more many as they are harder to
| train up, but for the most parts there is enough competition
| that passing savings on to customers is going to happen.
| throwawayboise wrote:
| Unless they are colluding that's not how a free market works.
| If supply is truly plentiful, someone will be willing cut
| prices to gain sales. Others will then have to follow or watch
| their customers disappear.
| Leherenn wrote:
| Doesn't that assume that you can scale relatively quickly?
| Otherwise the effect can stay marginal.
| bluGill wrote:
| You can though. Most of the labor is in skills that are
| easy to teach. You can take your half your seconds and
| promote to foremen, the other half as seconds under the old
| seconds. The foremen get the old third line as seconds, and
| you hire all new third-line people. There are a few people
| who aren't worthy of, or don't want that promotion, but
| overall the limit is how fast you can convince
| inexperienced people to work for you. This process can
| repeat yearly. You can also work more overtime - money
| talks to a lot of young people.
|
| You do take a small productivity hit, so it isn't all
| smooth. Still there is plenty of opportunity to expand to
| meet demand.
| jonfw wrote:
| With residential construction, most of the jobs are being
| contracted and subcontracted out, so promoting new
| foreman, etc. isn't even overhead the builder worries
| about. They just get new crews bidding on jobs out of
| nowhere
| bluGill wrote:
| You are at least half right. The new crews are not out of
| nowhere though - the builders know who the good foremen
| are, so when those foremen go on their own they will take
| them. Builders don't just take bids from anyone, they
| call the companies they always use to bid on a job. The
| builders often keep the same crews busy year round: there
| is no bidding, just at the end of one job they tell the
| crew where the next job is. When a builder has more work
| than crews they contact their current sub contractors and
| ask if any want to expand.
| throwaway5752 wrote:
| I wouldn't buy a house now if I could help it. It only seems
| reasonable because of extremely low rates. That is also the same
| thing driving equity valuations in our field to historically
| unusual levels. This is partially driven by market and partially
| driven by monetary policy, and it really can't go much lower than
| it is. Rate increases have a large increase on the present value
| of a mortgage of stock.
| almost_usual wrote:
| I didn't bet on this, have excess funds and pulled the trigger
| last month and closed on a home where I want to be. I don't
| think I'd care if the price dropped 50% tomorrow, I'm where I
| want to be in the long run and my rate is a near record low.
| throwaway5752 wrote:
| Buy a house because you want one, and because you like the
| specific house. Just not because it's an investment or FOMO.
| If you pay $100,000 more than you would at a 100 higher basis
| points, but you live in it 20 years you will certainly build
| back equity and hedge yourself against rents to make up the
| difference.
|
| There are places where home prices are just getting back to
| where they were in 2006, though. You can certainly end up
| underwater on a mortgage and stuck. Property taxes,
| insurance, and maintenance are high fixed costs with a home.
| ttul wrote:
| Gen-X: "We've got all this extra cash because we couldn't fly
| anywhere or go on cruises. Let's build our dream home in the
| mountains."
|
| Boomer: "Well, the 401-K is up a ton. Can't seem to spend the
| cash pouring out. Let's upgrade the house and buy a second home
| somewhere nice."
|
| Millenial: "We still have no savings because rent is insane and
| incomes have not kept up with inflation for decades as capital
| has played a larger role in growth than labour. We continue to
| have no long term security from a pension. I guess we'll just
| keep slaving away..."
| smabie wrote:
| While not representative, I would imagine that for most
| millennial HN users, 2020 was their best year in terms of
| financial gain: roaring stock market, wfh and CoL savings,
| insane crypto boom, record level bonuses, etc.
|
| I do understand that it isn't a representative picture, but
| among my friends, none of us have ever done so well financially
| in our entire lives.
| WanderPanda wrote:
| Bitcoin enters the game.
| dcolkitt wrote:
| A lot more builders should be looking into steel framing. Light
| gauge steel has also gone up, but nowhere near as much as lumber.
| For the typical project, it's probably cheaper now than wood
| framing. Especially when you take into account that steel framing
| can be pre-cut at a factory with CAD software, requiring much
| less skilled labor onsite.
|
| And steel makes a _much_ better frame. Fire resistant, termite
| free, mold free, holds up better in earthquakes and floods,
| stronger, doesn 't rot, doesn't warp. The problem with the
| construction industry takes way too long to adapt new patterns,
| even long after shifting technology and economics makes it
| compelling.
| idiotsecant wrote:
| Steel framing also has a tiny fraction of the r-value of wood.
| It might seem like the framing element is irrelevant but it
| adds up quickly. A layer of R-19 batt insulation is 63% less
| restive to heat transfer (effectively R-7.1) when installed in
| an assembly of 2x6 metal studs on 16" centers, compared with
| R16 in the same assembly in wood.
| kaydub wrote:
| A lot of wood framing is being done at factory and then
| assembled on site.
| tgb wrote:
| I see this in new construction in my area and have wondered
| about having a electrically conductive frame. Any danger there?
| Also how do you mount anything if you don't have wood studs?
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