Daily Archives: November 11, 2018

Lumber prices drop 10.3% | Bedford Corners Real Estate

Softwood lumber prices fell 10.3% in October—the largest drop since May 2011—according to the latest Producer Price Index (PPI) release by the Bureau of Labor Statistics. The producer price index for softwood lumber has fallen 21.2% since setting the cycle and all-time high in June (see below). Even after the decrease, however, the index currently sits just 4.7% lower than the prior-cycle high set in 2004.

The final demand price index for OSB has followed a path similar to that of softwood lumber over the last three months.

Since climbing 38.1% in the first seven months of 2018, OSB prices have fallen 16.6%. The price index for OSB is now 15.2% and 15.7% higher than it was to start 2018 and 2017, respectively.

Residential construction goods input prices increased 0.4% in October and have now risen 7.5% over the last twelve months. The index decreased only twice during that period, by 0.1% and 0.5% in December 2017 and August 2018, respectively. Year-to-date residential construction goods input price increases in 2018 (+5.6) continue to outpace the increase during the same period in 2017 (+2.9%).

Gypsum prices fell 1.6% in October, continuing what has been a relatively volatile year. The price index for gypsum products is 6.3% higher than it was to start 2018, but the year-to-date price increase masks large fluctuations within the year. Consecutive-month increases of 5.4% and 6.1% have been partially offset by two-month decreases of 3.3% and 1.8%.

The last several large increases in the gypsum price index has been foreseeable, as large wallboard producers sent out price increase announcements in the March-May and October-December periods. These announcements informed customers that wallboard prices would increase effective as of January or June/July, depending on the announcement date. Examples of such announcements may be found here and here.

Ready-mix concrete prices declined 0.5% in October. After a large price increase (relative to historical data) in early 2018, prices of ready-mix concrete dropped and have remained essentially unchanged since July.

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Softwood Lumber Price Decline Largest in Seven Years

Zillow Stock Plunges as a Cooling Housing Market Stymies Its Risky Expansion Plans | Pound Ridge Real Estate

Zillow’s stock plunged as much as 20% late Tuesday after the company warnedthat revenue this quarter would fall short of Wall Street expectations, exacerbating investor concerns about the prospects of online real-estate startups like Zillow and Redfin as the U.S. housing market is starting to slow down.

The news caused Zillow’s stock to fall as low as $32.40 a share in after-hours trading, or 20% below its official closing price of $41.04 a share. Redfin, another online real-estate company, fell as much as 6.5% in aftermarket trading.

After nearly a decade of recovery and slow growth, the U.S. housing market has been heading into a slowdown in 2018. Not only are mortgage rates rising, but housing prices have been climbing about twice as fast as average incomes. Sales of new homes as well as previously owned homes have been slowing from a year ago. Tax reform enacted late last year has also reduced tax incentives to buy homes.

Those trends have hurt the stock performance of Zillow and Redfin alike. At its low point late Tuesday, Zillow was down 51% from its 52-week high, while Redfin was down 53% from its high point in the past year.

Zillow started out as an online real-estate listings service that, once successful, began to seek out new business models. Like Redfin, it moved into buying and selling homes. In May, Zillow’s stock plunged on news that it would start buying and quickly flipping homes for resale. In August, its stock plunged on again on news it was buying an online-mortgage lender, Mortgage Lenders of America. Both represent traditionally risky markets that Zillow believed would pay off in the long term.

“Zillow Group is undergoing a period of transformational innovation,” Zillow CEO Spencer Rascoff said in the company’s earnings release. “We believe that these changes will have positive long-term effects for consumers, our industry partners and our business. It will take time for advertisers to adapt to these changes, but we are confident that they set us up for long-term growth.”

During that expansion, however, Zillow and Redfin have had to face dual headwinds in rising interest rates, which can deter home purchases, and in slowing home purchases.

While Zillow’s move into adjacent markets may hold some long-term promise, investors are concerned about their short-term outlook. “Zillow was in fantastic shape just six months ago,” CNBC’s Jim Cramer said last month. “We loved their attempts to corner the real estate advertising market. Then they decided to move into a totally new, totally risky business at what may be the worst possible time, and the stock has since cratered.”

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http://fortune.com/2018/11/06/zillow-stock-plunges-20-warns-disappointing-revenue-risky-expansion/