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Here’s What “Preceded the Last Housing Crisis” – and, It’s Happening Again

What homeowners need to know about lumber’s dramatic rise and fall

by Bob Stokes
Updated: August 10, 2021

The price of lumber more than quintupled from April 2020 through early May of 2021.

This price surge added $36,000 to the cost of the average single-family home, according to the National Association of Homebuilders.

Around the time of the commodity's peak price, even higher prices were expected:

  • Home builders expect lumber prices to increase again (April 5, ABC 33/40)
  • Don't expect those record high lumber prices to drop anytime soon (May 5, WTHR-TV)

After lumber's price started to decline, our June Elliott Wave Financial Forecast called for even lower prices. Here's a chart and commentary:

LumberBuyingPanic

As the headline on the chart suggests, the final run-up looks suspiciously like a buying panic. Notice that prices peaked the exact day they met the top line of the trendchannel formed by the rally from 2020. It was May 10... The day of lumber's closing high on May 7, the 5-day DSI indicator (trade-futures.com) was 96%, a record high over the past 34 years of data.

Our just-published August Elliott Wave Financial Forecast provides an update with this chart and commentary:

Timber

As this updated chart from June shows, lumber prices have plunged 71% in just ten weeks, a decline that is similar in size to the crash in oil prices in 2008. In June, EWFF... called for further losses.

Here's what homeowners need to know about lumber's dramatic price slide, as our August Financial Forecast continues:

Falling lumber prices also preceded the last housing crisis, falling 42% from August 2004 to August 2005. Home prices followed the decline in mid-2006. [emphasis added]

Indeed, the "red hot" U.S. housing market is already starting to show weakness (CNBC, July 26):

Housing boom is over as new home sales fall to pandemic low

Get more insights into major U.S. financial markets, including stocks, bonds, gold, silver, the U.S. dollar and more, by following the link below.

Price Targets Set for Major U.S. Financial Markets

EWI's analysts set price targets for stocks, bonds, gold, silver, the U.S. dollar and more... in accord with the Elliott wave model.

Price targets are a far more effective strategy for investors and traders, versus making impulsive decisions "in the moment."

Realize that most investors feel highly optimistic at major tops, and deeply pessimistic at major bottoms. In other words, investors' emotions have historically betrayed them at key turns.

Learn the price targets our Elliott wave experts have set for key U.S. financial markets -- and why.

Follow the link below to get started.

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