GettyAccording to Mace McCain (Chairman of Frost Investment Advisors), the lumber price has already dropped.He doesn't think prices will rise again. McCain anticipates that rangebound trading will cap out at $600 over the next two-years.He said that "[Lumber] has reached a point of equilibrium because housing has reached a point of equilibrium."Subscribe to our daily newsletter 10 Things Before The Opening Bell.According to Mace McCain (Chairman of Frost Investment Advisors), the lumber price has already dropped. He doesn't expect a runaway rebound.McCain instead sees lumber trading as rangebound in the $500-$600 per thousand feet range for the next 2 years. This is just 15% of the upside to current levels.McCain says that the relatively sideways trading is due to two competing forces. The first is the US's ongoing housing shortage. This is a positive driver for lumber prices and should keep them at least $500 above their pre-virus levels.McCain also points out that rising home prices are dissuading buyers as well as sapping demand. Therefore, the $600 limit on the maximum price lumber can be sold over the next 24 month is set at $600. He calls it "equilibrium" and refers to it as a middle ground."We are out of panic buying. We are out of the huge industry shortages. He told Insider that we are out of the extremes. "[Lumber] has reached a point of equilibrium as housing is in a similar state. "We're going to experience a stabilization."McCain believes that lumber prices will continue to fall below his range if the Federal Reserve starts raising interest rates aggressively. It's not McCain's base case.Insider told him that the Fed tightening and increasing interest rates are what will usually soften a realty market. "I don’t believe the Fed will be aggressive. "I don't believe the Fed will do anything to ruin the mortgage market."Lumber futures fell as much as 5% to $502.30 per 1,000 board feet on Wednesday. They are currently 70% below the record high of $1711 in May.This record was set before the COVID-19 epidemic. Prices for lumber had risen more than 500% over the 15 months following the outbreak. Supply-chain disruptions and a renewed increase in homebuilder growth led to a surge in lumber prices.McCain is optimistic that the industry will not be affected by the new Delta virus. This comes after 2020 sawmills were forced to halt operations due to a pandemic lockdown.He said, "I don’t believe the lumber industry will necessarily be shut down." "I believe they have learned to deal with it. We don't see any barriers to supply."Read more: Laszlo Birinyi, an investment legend, shares his strategy for cashing in on a bullish trade in the stock market that has already earned him 250% this fiscal year. He also explains why he isn't worried about a correction.
