Players not directly involved in forest products jumped for joy this week on seeing US housing starts solidly at more than 1 million annualized for 2013.
It is now apparent to all that building in America has absolutely recovered from the terrible crash of 2006-2010. Forest industry players have known the outlook is positive since at least September, so this certainty around economics in general is providing welcome added confidence.
Indeed, it could be said that the US continues somewhat underbuilt and that the lumber and panel supply chain is quite tight for inventory.
Getting a jump on expected higher wood commodity prices next year, Action Floor Systems, out of Mercer, WI, one of the largest suppliers of hardwood maple sports floor systems in the US, announced a price increase of 5-7 per cent on all maple flooring effective December 16, 2013, according to a company press release Wednesday.
“Lumber costs have increased dramatically during the past two years due to constrained supply and greater market demand,” Action Floor Systems President Tom Abendroth stated. “Increasing our pricing at this time is necessary to maintain the level of product quality and service our customers expect and to continue our commitments to new product development and sustainable forests.”
“If lumber prices continue to rise, and we think they will, additional increases may be necessary” Abendroth noted.
As well, Patty Bedient, Executive VP and CFO at Federal Way, WA’s, Weyerhaeuser said in an investor conference call Tuesday, “Housing has started to recover, but we are still very much in the early stages. While the exact shape of the recovery is difficult to predict, there’s really no disagreement that the overall direction is up, we believe housing will be very positive going forward.”
North America
US housing production rose 22.7 per cent to a seasonally adjusted annual rate of 1.09 million in November, according to extremely delayed figures finally released Wednesday by the US Commerce Department.
Single-family starts posted a 20.8 per cent gain, to a seasonally adjusted annual rate of 727,000 units in November, their fastest rate since December of 2007. Multifamily production was up 26 per cent to 364,000 units. Regionally, combined starts activity rose 41.7 per cent in the Midwest, 38.5 per cent in the South, and 8.8 per cent in the West, but fell 29.4 per cent in the Northeast.
Overall building permits fell 3.1 per cent to 1.007 million units in November. Despite the modest decline, this was the second month that new permit issuance topped the million mark.
Regionally, total permit issuance increased 7.8 per cent in the Northeast and fell 7 per cent in the South, 0.4 per cent in the West, and 0.6 per cent in the Midwest.
Meanwhile, US homes gained US$1.9 trillion in total value this year, the biggest jump since 2005, as the real estate market rebounded from the recession, Zillow Inc said also Wednesday.
At the end of 2013, the housing stock will be worth about US$25.7 trillion, Zillow said in a statement. US homes as a whole lost US$6.3 trillion in value from 2007 through 2011 and have recovered 44 per cent of that, according to the Seattle, WA-based property-data firm.
Home prices are rising across the US as investors drain markets of inventory and improving employment brings in more buyers. Almost 90 per cent of the 485 metropolitan areas analyzed by Zillow had price gains this year. The total value of the nation’s housing stock jumped about 7.9 per cent from 2012, the second straight annual increase, according to the report.
Price increases will slow next year to a pace closer to the historic norm of 3 per cent to 5 per cent.
Other data suggest this slow down might be just around the corner.
Billings at US architecture firms fell in November, according to the American Institute of Architects (AIA) Wednesday.
Billings at architecture firms, tracked by the Work-on-the-Boards survey, fell to 49.8 in November, from 51.6 a month earlier. The inquiry index, which tracks a firm’s capacity to take on additional work, slipped to 57.8. A score above 50 indicates an increase in billings, while a reading below 50 indicates a negative outlook.
After six months of steadily increasing demand for design services, the Architecture Billings Index (ABI) paused in November. The AIA reported the November ABI score was 49.8, down from a mark of 51.6 in October. The new projects inquiry index was 57.8, down from the reading of 61.5 the previous month. Elsewhere, the National Association of Home Builders (NAHB) said Thursday that rental absorption rates are improving. Absorption rates for new rental and for-sale multifamily units continued to improve during the third quarter of 2013, consistent with the positive trends that been in place since the end of the Great Recession.
According to data from the Survey of Market Absorption of Apartments (SOMA), completions of privately financed, unsubsidized, unfurnished rental apartments were up strongly for the four quarter period ending with the second quarter of 2013. A total of 115,800 such apartments were completed for those four quarters, compared to 82,900 a year earlier.
Non-seasonally adjusted three-month absorption rates (units rented after construction of the property is complete) for 2Q completions (rented during 3Q) increased to 71 per cent, from 62 per cent a quarter prior. Absorption rates for rental apartments have been generally rising since late 2008 as rental demand increased as a result of the housing downturn.
This after Rick Judson, chair of the National Association of Home Builders (NAHB) and a home builder and developer from Charlotte, NC, issued a warning December 6 about rental affordability. Mortgage costs remain historically low and payroll gains make prospective buyers more confident, he said.
The Harvard Joint Center for Housing estimates that the US requires between 1.6 million to 1.9 million starts just to accommodate population growth and new households.
“A report released today by the Harvard Joint Center for Housing Studies highlights serious affordability problems for many of America’s renter households, and NAHB supports many of the policy initiatives outlined in the study to meet this ongoing challenge,” said Judson’s post on the NAHB blog. “Of primary importance, efforts to reform the housing finance system must include a federal backstop to maintain broad liquidity during all economic cycles and ensure that rental housing can continue to be built and preserved. The report affirms this strategy by stating that ‘what is most important is that reform efforts do not lose sight of the critical federal role in ensuring the availability of multifamily financing to help maintain rental affordability, as well as in supporting the market more broadly during economic downturns.’
“We applaud the Joint Center for drawing attention to these critical issues and the important role of the rental housing market to the housing industry.”