by Steve St. Angelo, SRSRocco Report:

As the price of lumber reaches an all-time record high, investors better take this as another warning that the market is in a massive bubble. However, a large percentage of investors today are unable to spot bubbles because everything is in a bubble. So, to see the price of lumber hit the highest price ever, doesn’t phase the market one bit. Well, maybe the home builders understand the dangers of rising lumber prices, but the overall market is clueless.

The price of 1,000 board-feet of lumber reached a new high of $629 today, up from $592 last week when I wrote my article, The 3 Stage Housing Bubble Collapse. The lumber price is not only up a staggering 42% this year, but it’s also up 175% since the beginning of 2016:

According to the article, With Lumber in Short Supply, Record Wood Costs Are Set to Juice Home Prices:

Marc Towne of Classic Homes, which builds midrange to high-end houses in Colorado Springs, Colo., said he is spending $8,500 more on lumber for a typical home than a year ago, an increase of almost 40%. The company’s passing on about half the cost to buyers for now while it waits to see if lumber prices fall.

Even though many homebuilders lumber costs have increased significantly, many are passing half of that cost to the buyer waiting to see if prices will fall. Well, ever since that article was written back at the beginning of March, lumber prices have jumped by another 14% from $550 to $629.

As home prices increase, more Americans are pushed out of buying a home. In a recent interview on BNN Bloomberg, the CEO of the NAHB, the National Association of Home Builders stated that for every $1,000 increase in the price of a new home, 150,000 potential American homebuyers are price out of the market. At the time of the interview on Feb 20th, the extra lumber cost for the average house was $3,000. However, the lumber price on Feb 20th was only $517 compared to the $629 today.

Now, the reason for the surging lumber price has been blamed on three factors:

Canada lumber tariff
Shortage of rail cars for transportation of lumber
Increased forest fire damage to lumber stocks

Regardless, the price of lumber has never been higher. Also, if we look at the lumber market sentiment, it is also at a new record high:

Looking at the Sentiment Trader’s chart, the lumber price at $619 (yesterday) pushed the market sentiment (optix) to a new high reading of 90. If we go back all the way to 1991, the sentiment has never been higher. Also, the second highest lumber price ever, not including the current 1-year trend, was $470 in 1993. So, the higher lumber price is being set up for one heck of a BIG FALL.

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