{"id":87912,"date":"2024-07-19T07:33:40","date_gmt":"2024-07-19T07:33:40","guid":{"rendered":"https:\/\/tin.happy-projects.ro\/the-november-us-election-could-determine-lumber-demand-and-prices\/"},"modified":"2025-09-19T09:02:27","modified_gmt":"2025-09-19T09:02:27","slug":"the-november-us-election-could-determine-lumber-demand-and-prices","status":"publish","type":"post","link":"https:\/\/www.timberindustrynews.com\/ro\/the-november-us-election-could-determine-lumber-demand-and-prices\/","title":{"rendered":"The November US election could determine lumber demand and prices"},"content":{"rendered":"

The November 2024 U.S. presidential election could impact the Federal Reserve's approach to interest rates. Democrats support an independent Fed, while some Republicans argue for changes to the central bank's role. A Republican victory could mean rates will drop much faster than under the Democrats, potentially boosting new home construction and lumber demand.<\/span><\/p>\n

US lumber prices closely follow changes in interest rates, significantly impacting demand for new home construction and wood products. Weyerhaeuser Company operates as a Real Estate Investment Trust (REIT) with a lumber call option attached, providing exposure to the lumber market without trading futures. Falling energy prices, potentially achieved through Republican energy policies, could reduce inflation, leading to lower interest rates and increased demand for lumber and new home construction.<\/p>\n

\"\"<\/a>Lumber, despite being the most illiquid commodity futures market, remains a critical industrial raw material with a high correlation to interest rates. All commodities are rate-sensitive, with higher rates increasing the cost of carrying inventories and causing prices to fall, reflecting declining demand. Conversely, lower rates encourage buying as consumers can stockpile supplies with attractive financing rates. Lumber particularly exacerbates this relationship as it is a primary material in new home building and construction. Higher rates increase mortgage expenses, reducing lumber demand, while falling rates encourage new home purchases and building, increasing wood demand.<\/p>\n

With U.S. interest rates remaining higher for longer, physical lumber futures fell 22.99% in Q2 and were 21.24% lower over the first six months of 2024. Nearby lumber futures settled at $450.50 per 1,000 board feet at the end of June and remained around the same level in mid-July as the market awaited the Fed\u2019s next move.<\/p>\n

While lumber futures are illiquid, Weyerhaeuser Company (NYSE: WY) operates as a REIT with a lumber call option attached, making it a liquid proxy for those seeking lumber exposure without venturing into the illiquid lumber futures arena.<\/p>\n

Lumber prices have followed interest rates closely. A decline from over 7% could ignite new homebuilding. The illiquidity in the lumber futures market magnifies trend changes and price movements as bids to purchase wood often disappear during bearish trends, and offers to sell evaporate when lumber prices rally.<\/p>\n

Physical lumber futures have been in a bearish trend since mid-2022 when the CME replaced random-length futures with physical futures. The monthly physical lumber futures chart shows a decline from $712 in August 2022 to under $460 per 1,000 board feet in July 2024. Including the old random-length contract, lumber's price action has closely followed the Fed\u2019s hawkish monetary policy. The central bank began increasing short-term rates from zero in March 2022, with rate hikes pushing the Fed Funds Rate to a midpoint of 5.375%. Lumber prices fell from $1,477.40 per 1,000 board feet in March 2022 to below $460 on the nearby futures contract.<\/p>\n

Higher interest rates have pushed 30-year conventional fixed-rate mortgages from below 3% to over 7%, increasing the monthly payment on a $400,000 mortgage by over $1,300 and precluding many potential home buyers from purchases. As the market for new homes declined, the demand for lumber fell. Lumber prices followed interest rates like an obedient puppy.<\/p>\n

Republican energy policies favoring energy independence and exports could reduce inflation by lowering oil prices, potentially to $40 per barrel. Lower energy prices would push inflation to or below the Fed\u2019s 2% target, justifying rate cuts and lower mortgage rates, supporting new home purchases and lumber demand.<\/p>\n

The market for existing homes remains tight, supporting new homebuilding. Even if rates decline, homeowners with sub-3% mortgages are likely to retain their low-cost financing, not upsize or downsize, keeping existing home supplies tight. Lower rates could increase home prices further, loosening existing home supplies and encouraging new home demand. In an environment with growing pent-up demand, the market for new home construction could experience a boom when rates decline.<\/p>\n

Weyerhaeuser is a REIT with a call option on lumber, offering a liquid alternative to lumber futures. At below $500 per 1,000 board feet, lumber is less than one-third the price at the 2021 record peak. Weyerhaeuser owns or leases timberlands in the United States and Canada. At $29.50 per share, WY has a $21.17 billion market cap and trades an average of over 3.9 million shares daily. The $0.80 annual dividend translates to a 2.71% yield.<\/p>","protected":false},"excerpt":{"rendered":"

The November 2024 U.S. presidential election could impact the Federal Reserve’s approach to interest rates. Democrats support an independent Fed, while some Republicans argue for changes to the central bank’s role. A Republican victory could mean rates will drop much … Continue reading →<\/span><\/a><\/p>","protected":false},"author":1,"featured_media":96366,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[4716],"tags":[],"class_list":["post-87912","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-latest-trends"],"acf":[],"yoast_head":"\nThe November US election could determine lumber demand and prices - Timber Industry News<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.timberindustrynews.com\/ro\/the-november-us-election-could-determine-lumber-demand-and-prices\/\" \/>\n<meta property=\"og:locale\" content=\"ro_RO\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The November US election could determine lumber demand and prices - Timber Industry News\" \/>\n<meta property=\"og:description\" content=\"The November 2024 U.S. presidential election could impact the Federal Reserve's approach to interest rates. 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