Lumber could crash but a recession may cause it to rally next spring

By Andrew Hecht
The Globe and Mail
September 1, 2022
Category: Finance & Economics

As the winter approaches, new home construction tends to decline, weighing on lumber demand. There is an element of seasonality in the lumber market as it reached the $448 low in August 2021 with the fall and winter on the horizon. However, in 2022, the upcoming offseason faces rising interest rates. At the end of 2021, thirty-year fixed-rate mortgage rates were below the 3% level, and they recently were over 6%. …As the central bank’s policies have consistently been reactive instead of proactive, they run the risk of suddenly reversing to a more dovish stance if GDP continues to decline. The Fed continues to utter hawkish squawks, but the dovish coos could be on the horizon. Lumber prices will likely continue to be highly sensitive to interest rates and could provide signals for other commodity prices. …The trend remains lower in early September, but wood prices will follow the economic data over the coming months.

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