From Baseball Cards to Building Materials: A Tale of Price Surges, Economic Trends, and the Outlook for 2024
- November 16, 2023
- by Nick Allison, Analytics Manager
I used to collect sports cards as a kid, begging my mother to buy my brothers and me a pack at the store. I’d look into all the nooks and crannies for some quarters to buy a pack and put baseball cards on my Christmas list. I vividly remember my excitement opening a pack of Upper Deck Collectors Choice, then cracking open the Beckett magazine to see what each was worth.
Like many in my generation, I eventually aged out of the hobby. Many my age got back into the hobby, as there was a growing excitement, and we now had a little more money to spend than we did at 8 years old. At first, prices were super cheap, and one could buy high-end boxes with 24 packs for about $125. Over time, prices slightly rose, but after COVID hit, prices soared — not only for unopened products, but single cards.
The higher-end products went to $450 and standard boxes at retail went from $20 to $35 to $40. However, prices got too high, and many retailers were stuck with shelves full of $40 products. Prices have since come down a bit. Even blue-chip cards like Michael Jordan rookies were down 50% or more from the peak.
Over the last three years, we’ve seen the same phenomenon in sports cards revealed in a variety of industries and verticals. The hardwood lumber producer price index measured at around 200 at the bottom of the COVID dip. By May of 2022, the index peaked at an all-time high of 316.1. Since then, the index has fallen to just under 250. The same could be seen in softwood lumber, which bottomed out in April of 2020, soared to 581 in May 2021 and has since fallen to around 262.
This applies to many other industries outside building materials as well — new cars, used cars, luxury and resort hotel rentals among others. In many industries, the prices/costs gradually bottomed out during the depths of COVID shutdowns, then rapidly rose to a peak, then settled back down to — usually — a level slightly above where they were just before COVID hit.
Unfortunately, there are a few other economic sectors that exhibited this pattern. Of key importance is the U.S. personal rate of savings. The savings rate ranged between 4% and 8% between Q1 2013 up through COVID. However, once the stimulus checks and other benefits were extended, this rate jumped to an all-time high of 32% in April 2020, quickly dropped back down, peaked again at 26.1% in March 2021 and has since fallen — this time to levels below pre-COVID.
Clearly, most households spent the stimulus money and are now saving a lower rate than they did before the pandemic. While it’s clear that U.S. citizens spent their stimulus money, the lower current rate of saving is likely due to the fact that the Consumer Price Index has risen steadily, with a sharp jump in 2021.
Due to a variety of factors like demographics, inventory levels and household formations, we expect that the 2020s will generally be a good one for housing — and just as importantly, remodel activity. Obviously, COVID changed some of the timing in the early part of this decade, but housing and remodeling recovered fairly well.
The rest of this decade should be very good for our industry — albeit with perhaps some turbulence in 2024. Headwinds for next year include the 3-month / 10-year yield inversion (which over the last 60 years or so has almost always preceded a recession), the personal rate of savings (which means homeowners have less money for remodeling) and interest rates (highest since the housing crash). Mortgage rates are now above 8% and over 40 million buyers are locked into their existing low-rate mortgages, making new or existing home purchases limited for the near term.
Further uncertainty comes from the conflict in the Middle East and Ukraine, the U.S. election in 2024 and the fact that, over the past four to six years, many predictive relationships have been broken. For example, for over two decades, existing home sales were highly correlated with roofing activity. However, changes in roofing material changed when reroof jobs were needed. We’ve seen other predictive connections be broken in our industry as well.
In general, we are approaching 2024 with a bit of caution. We recognize that a lot has changed in recent times, and the near-term future is a bit more clouded than it has been in past years. However, we remain fairly confident that 2025 to 2029 will be a rewarding time for domestic hardwood manufacturers and many related industries.
We expect mortgage rates to moderate a bit in 2H 2024, at which time deferred higher-income remodels should kick into gear. By 1H 2025, look for a surge in remodels, postponed moves and a jump in existing home sales.
Labor might be tight during this time, but the 2H of 2025 should bring significant increases in housing and remodel activity. Obviously, there will be geographic regions with better or worse outcomes than the overall average, but, in general, we will look to buckle down for 2024 while preparing to make the best of what we expect to be a great five-year period for our industry.