US Housing Starts and Softwood Lumber Prices: August & September 2020

US Housing Starts and Softwood Lumber Prices: August & September 2020

Privately-owned US housing starts in August were at a seasonally adjusted annual rate of 1,416,000, the Commerce Department said Thursday. This is -5% below the revised July estimate of 1,492,000, but is +3% above the August 2019 rate of 1,377,000. Total starts were up +3% year-over-year compared to August 2019. The dip in housing starts was driven by a -25% decline in multifamily construction activity.

For the week ending September 11, 2020, softwood lumber prices flattened or dropped for the first time in many months, with benchmark softwood lumber commodity item Western S-P-F 2×4 down -$6, or -0.6%, compared to the previous week, said Madison’s Lumber Reporter. Prices for this construction framing dimension softwood lumber item is up an incredible +$214, or +29% from one month ago, when it was US$746 mfbm. Compared to mid-September 2019, this price is up an astonishing +$584, or +155%.

The USA purchases approximately 65% of Canada’s dimension lumber production mostly for home construction framing, while Canadian buyers account for about 10%, and those in Japan take 6%.

US Housing Total Starts August 2020 & Benchmark Softwood Lumber Prices September 2020

WSPF-SYP-ESPF-2x4 Softwood Lumber Prices-2year-TOTAL-US Housing STARTS
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* Madison’s Lumber Prices, weekly, are a good forecast indicator of US home builder’s current lumber buying activity ——> DETAILS *

“Wildfires raged throughout the Pacific Northwest as the pause in lumber sales persisted.”  — Madison’s Lumber Reporter

US Housing 1-Unit Starts August 2020 & Benchmark Softwood Lumber Prices September 2020

WSPF-SYP-ESPF-2x4 Softwood Lumber Prices-2year-1Unit-US Housing STARTS
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Single-family housing starts in August were at a rate of 1,021,000; this is +4% above the revised July figure of 981,000. Single family starts were up +12% year-over-year. Single-family building permits increased +6% to a rate of 1,036,000 units.

“With labour shortages and rising lumber costs compounding slowing activity, consumers can expect much higher prices for new homes over the next 12 months.” — George Ratiu, senior economist at Realtor.com

Where this situation will go no one knows … a combination of unprecedented circumstances makes every day a new adventure for sawmills and for customers.

Benchmark Softwood Lumber Commodity Western Spruce-Pine-Fir KD 2×4 #2&Btr Prices: Sept 2020

Western Spruce-Pine-FIr KD 2x4 #2&Btr prices SEPT 2020
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Softwood Lumber Prices Stabilize As Production Starts to Catch Up from Lows Earlier this Year

Most Western S-P-F customers in the US got spooked by recent yo-yoing futures board movement, culminating in a more even pace of sales last week. Sawmills kept their prices flat for the most part and continued to see strong demand, but the fever-pitch of buying in recent weeks subsided. Sawmill order files were into early- or mid-October and delivery times stretched ever-further as rail service worsened. Wildfires in the Pacific Northwest were on everyone’s mind as a deadly fire season raged in California, Oregon, and Washington State.

Canadian Western S-P-F sawmills described a continuation to the pause to sales they saw burgeoning the previous week. For the first time in months small amounts of cash wood made their way to US customers. Demand was definitely quieter as many customers waited to catch up on previously booked shipments. However, plenty of hungry buyers were still searching for limited material. October 3rd order files at sawmills were commonly reported. Meanwhile transportation only got worse as arrival times were into two- to four-weeks. Recent rail car supply percentages were in the mid-60s for one large producer and reducing each week.

With the weekly price dropping for the first time in many months, compared to one-year-ago last week’s Western S-P-F 2×4 price rose by +$503, or +110%, relative to the 1-year rolling average price of US$457 mfbm and was up +$544, or +137%, compared to the 2-year rolling average prices of US$411 mfbm.

Madison's Historical Softwood Dimension Lumber Price Comparison Table SEPT 2020
madisonsreport.com

The above table is a comparison of recent highs, in June 2018, and current September 2020 benchmark dimension softwood lumber 2×4 prices compared to historical highs of 2004/05 and compared to recent lows of Sept 2015:

Shrewd investors know that construction framing softwood lumber prices are a good leading indicator for US housing activity, including home building and home sales. Don’t miss out, get lumber price data updates directly to your desktop every Friday morning.

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