May Market Update: How the Economy Impacts our Market

Over the past several weeks, commodity lumber and panel markets have suffered from growing anxiety about the state of the economy for the remainder of 2022. Rising interest rates and soaring inflation have deflated much of the positive sentiment that was apparent in the marketplace only a few months ago.

To be clear, demand for building products – in the near term – is still solid and even robust in some areas. Housing starts, on an annualized basis, are also still strong – up almost 15 percent from the same period last year.

Most viable distribution/contractor yards say their business looks solid into the middle of the summer. After that, many have questions about the second half of the year, and how the rising rates and inflation will affect business. It will affect business, but how much?

Some say they expect things to still be solid, but flat in Q3 and Q4; in contrast to recent years when business/demand accelerated into the last quarters of the year. Not a surprising outlook, but simply conjecture at this point.

There is and will continue to be a significant imbalance between supply and demand in the housing market for the foreseeable future. That has not changed. Certainly, rising interest rates will likely take the luster off of high home prices, but how much? Some analysts believe that the rate of price increases could surely moderate, slow down, or even stop – but they also concede, given the underlying demand, that home prices may likely remain elevated across the country. We’re going to see just how strong the housing markets are in the months ahead.

In terms of the marketplace, buyers have retreated to the sidelines in recent weeks, spooked by all the negative daily news surrounding our economy. Unsurprisingly, most customers are working off of very lean inventories, buying only their needs – even as the main building season gets underway. This is affecting commodity buying throughout the distribution pipeline, and causing some price erosion, at least for now. Customers and buyers are all on one side of the boat, once again. Typically, that spells volatility ahead. We’ll see.

Challenging times ahead for all of us as we navigate the realities of our economy. As always, we’ll be here and operating, putting out the best products possible and the best service in the industry.