Both of the following reports are from the Trends Journal:
Lumber Prices Add $36,000 To Cost Of A New Home
Lumber prices have risen 67% this year and 340% in the past 12 months, according to Random Lengths, a lumber industry research firm.
The price spikes have added $35,872 to the average cost of a newly built single-family home and $12,966 to the market value of a multifamily dwelling, the National Association of Home Builders (NAHB) reported.
Lumber is scarce after seasons of massive wildfires in the western U.S. and duties imposed on imports during the Trump administration.
In addition to lumber, the price of drywall has gained 7% this year; steel products have climbed 18% to a record high; and copper has shot up 27% so far this year, setting a new record of its own.
Builders also have bid up raw land by 11% during the current housing rush, trying to stockpile spots to build the new homes the flood of buyers are demanding.
One in every four homes sold now is newly built; in the past, the ratio has been one in ten, CNBC noted.
However, the new work-from-home norm for white-collar employees, federal stimulus checks, and record savings during the pandemic are combining to drive people to the housing market in droves.
At the same time, the number of existing homes for sale is at a record low.
Many owners have decided to stay put until the economy is on a more sound footing, some worry they would be unable to afford a new home at today’s record prices, and others have lost their jobs or had their work hours cut and cannot afford to move.
The NHAB is urging federal officials to lift all tariffs on lumber imports.
TREND FORECAST: To illustrate how fast and high inflation is rising, in our 23 March Trends Journal, we wrote,
Rising lumber costs have added $24,000 to the cost of the typical newly build home and $9,000 to the cost of building a single apartment, according to the National Association of Home Builders (NAHB).
“Current prices represent an intolerable, and frequently insurmountable, financial burden to home builders and contractors,” the NAHB said in a statement announcing the price rise.
Since that time, a little more than a month ago, the lumber costs to build a home rose to $36,000!
Again, the inflation spike is real, and it will force the Fed to raise interest rates. And the higher interest rates rise, the deeper the economy and equity markets will fall.
TREND FORECAST: In our 23 March issue, we noted these “dramatic price increases to illustrate how inflationary pressures are rapidly escalating but, at the same time, they are being played down by the Federal Reserve and Washington, as they promise to keep injecting more money into the economic system.”
And, just today, U.S. Treasury Secretary Janet Yellen is finally admitting what they in fact knew back then but kept playing down to keep equity markets rising.
As we also wrote in our 23 March Trends Journal, “And now, with more lockdowns across the globe and states on hold in the U.S. to open up, the economies will sink deeper, and yet more cheap money will be injected to artificially prop them up. In turn, currencies will depreciate, inflation will rise, and safe-haven assets will increase in value.”
Prices For Consumer Good Set To Rise
With prices for raw materials climbing, Nestlé, Procter & Gamble, Unilever, and other makers of consumer staples have laid plans to pass those greater costs to consumers.
We had predicted back in our 4 August 2020 issue that inflation – caused in part by supply-chain disruptions and then pushed up by higher demand as economies reopened – would steadily rise.
The price of palm oil, used in everything from lipstick to animal feed, has climbed to levels not seen since 2008 because of a shortage of migrant labor; milk prices in Europe are up 50% this year.
Costs for paper, plastic, and other materials to make packaging have risen 40%in the last 16 months, according to Mintec, a commodities market research firm.
The U.S. Consumer Price Index jumped 0.6% in March, the largest monthly gain since August 2012, the U.S. Bureau of Labor Statistics reported; Britain’s inflation sprinted at 0.7% for the month, due to rising prices for oil and clothing.
Confirming what we had long forecast, Unilever expects its input costs to rise even faster in this year’s second half as a global economic recovery sharpens demand for materials of all kinds, CFO Graeme Pitkethly said in comments cited by the FT. General Mills reports higher shipping costs.
U.S. makers Procter & Gamble and Kimberly Clark already have announced price hikes “in the mid-to high single digits” will appear on many of their products this summer, as we reported in the 27 April Trends Journal.
On-Trend: Also, some companies may choose to cloak price increases with “shrinkflation,” which involves holding retail prices steady while shrinking the amount of product in packages, Will Hayllar, managing partner at strategy consulting firm OC&C, told the FT.
TRENDPOST: Will consumers swallow the price hikes? John Ruth, CEO of the Build Asset Management advisory firm, made it clear when he said to FT, “Businesses will tend to pass on what the consumer can stomach.”
During the lockdowns, manufacturers typically swallowed cost increases to keep retail prices competitive. Now that the economy is reviving, consumers will soon share the price pain.
The rising prices in commodities and many products that are now evident are just the beginning of the price spike.
Manufacturers often place market hedges against rising prices, then work through current inventories before jacking up consumers’ costs. As a result, consumers will not see higher prices on many items for some weeks yet, even though raw materials costs have been climbing since January.
AUTHOR COMMENTARY
[7] The rich ruleth over the poor, and the borrower is servant to the lender. [22] Rob not the poor, because he is poor: neither oppress the afflicted in the gate: [23] For the LORD will plead their cause, and spoil the soul of those that spoiled them.Proverbs 22:7-22-23
V-shaped recovery, right? If you believe that, you must also believe in the Easter Bunny. It goes without saying that inflation is going to continue to rise as the dollar buys less and raw goods and materials goes up. America is on borrowed time (and that is putting it extremely mildly) and is poised to be the next Venezuela.
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Prepare accordingly. Do not buy into the gold, silver, and crypto delusion. That is a recipe for disaster. When this house of cards falls apart, gold coins are not the answer.
Bullions Running Out Of Physical Silver
Riches profit not in the day of wrath: but righteousness delivereth from death.
Proverbs 11:4
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