Softwood Lumber Tariff and US Housing

The conversation shifted slightly this week; or perhaps more correctly expanded, from specifics of assignation of US duties on imports of Canadian softwood lumber to the effects of that on a tenderly burgeoning US home building industry.

Rising wages and moderating home prices offset a rise in mortgage interest rates to give housing affordability a slight boost in the rst quarter of 2017, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI), released Thursday.

SOURCE: Madison’s Lumber Reporter

US Housing Affordability: 1Q 2017

In all, 60.3 per cent of new and existing homes sold between the beginning of January and end of March were affordable to families earning the US median income of US$68,000. This is up from the 59.9 per cent of homes sold that were affordable to median-income earners in the fourth quarter of 2016.

The Washington-based industry group said its index of mortgage applications to buy a home, a proxy for future home sales, increased 1.7 per cent on a seasonally adjusted basis to 250.3 points in the week ended May 5.

This was the highest level for this measure since 257.4 in the week of October 2, 2015, Mortgage Bankers Association data showed.

Interest rates on conforming 30-year fixed-rate mortgages were unchanged at 4.23 per cent last week, while average mortgage rates on other types of 30-year loans MBA track were 0.03 percentage point to 0.04 percent- age point higher than the prior week.

Conforming loans are those with balances of US$424,100 or less which qualify for guarantees from federal mortgage agencies Fannie Mae and Freddie Mac.

MBA said its seasonally adjusted index on conforming loan activity to buy a home rose to 316.9, which was the highest since April 2009.

SOURCE: Madison’s Lumber Reporter

Selected Operating Statistics, Large Publicly-Traded Home Builders

Below is a table from Calculated Risk showing selected operating statistics for nine large, publicly-traded home US builders for the quarter ended March 31, 2017.

SOURCE: Calculated Risk

Preliminary statistics from the Commerce Department estimated that US new single-family home sales (unadjusted) last quarter were up 12 per cent from the comparable quarter of 2016.


Chris Whalen, a housing finance analyst, said to the Financial Times Friday: “The big problem is the lack of construction lending. In the recovery, the whole system had a bias to more expensive housing and to jumbo loans [for high-end housing]. That US$150,000 or US$300,000 house in the middle market is not so good for the builder.”

As one executive at one large non-bank mortgage lender says: “Our company is gaining share in the market for mortgages on existing and new home sales, but if you look at the long-term trend line at the macro level, these are still at depressed levels. They have not recovered in the way, say, that auto sales have.”