Sales of new homes in the US have bumped up and down for the second half of this year and recovered upward once again in October.
While it is true that a slow-down is apparent in both construction and home buying activity, it is important to note that new building activity year-to-date remains almost even compared to January – October of 2021.
Total housing starts in the US for October 2022 fell -4.2% to 1.425 million units compared to the 1.488 million units reported for September, and were down -8.8% from the October 2021 rate of 1.563 million.Data for September 2022 was revised sharply higher, from the previously reported 1.439 million units.
After popping up in September, building permits in October dropped by -2.4%, to 1.526 million units from 1.564 million. This is -10.1% below the October 2021 rate of 1.698 million. During the first ten months of this year building permits were down only slightly compared to the same period in 2021.
It is interesting to note that total permits in August were 1.542 million units, just +7.6% above starts for October. As there is usually a two-month lag between a building permit and a housing start, this data indicates a good momentum for ongoing construction activity.
Combined, there was a very high 1.722 million units under construction, 794,000 of those single-family homes. This is well above the historical record-high of 1.628 million units that were under construction in 1973. These will eventually become starts and help to underpin residential construction.
Benchmark Softwood Lumber Prices November & US Housing Starts October: 2022
October starts of single-family housing, the largest share of the market and construction method which uses the most wood, were down by -6.1% to a rate of 855,000 units. Single-family authorizations were at 839,000 units, which is -3.6% below the September figure of 870,000 units.
Building permits are generally submitted two months before the home building is begun, so this data is as indicator of December construction activity.
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.
Madison’s Benchmark Top-Six Softwood Lumber and Panel Prices: Monthly Averages
Looking at lumber prices, after several weeks of staying flat, in the week ending November 25, 2022 the price of WSPF 2×4 #2&Btr KD (RL) was US$475 mfbm, said forest products industry price guide newsletter Madison’s Lumber Reporter.
This is down by -$15, or -3%, from the previous week when it was US$490 mfbm, andis up by +$13, or +3%, from one month ago when it was US$463 mfbm.
STAY AHEAD of US housing price data by getting access to softwood lumber prices. Released every Friday for that week, since 1952 Madison’s Lumber Prices is used by the forest products industry as a price guide for North American construction framing dimension softwood lumber. These are, of course, the inputs into US and Canadian home building materials.
* Madison’s Lumber Prices, weekly, are a good forecast indicator of US home builder’s current lumber buying activity ——> DETAILS
The U.S. Census Bureau and the US Department of Housing and Urban Development released November 23 new home sales and house price data. New home sales comprise 10% of real estate activity and are considered a leading housing market indicator as they are recorded when contracts are signed.
Bumping up and down in recent months, sales of new US single-family homes actually increased in October. There were 632,000 new single-family homes sold last month, which is up +7.5% from the downwardly revised September rate of 588,000 and is a -5.8% drop compared to October 2021 when it was 671,000.
Only 15,000 new homes sold last month were below US$400,000.
At the sales pace in September it would take 8.9 months to clear the supply of houses on the market, down from 9.4 months in September.
“The median and average new home price delivered was sharply higher in October, suggesting the high-end consumer has been able to withstand the increase in mortgage payments,” said economists at Contingent Macro.
There were 470,000 new homes on the market at the end of last month, up from 463,000 units in September. Houses under construction made up 63% of the inventory, with homes yet to be started accounting for 24%.
Completed houses accounted for 13% of the inventory, well below a long-term average of 27%.
Benchmark Softwood Lumber Prices November & US NEW Home Sales October: 2022
The median sales price just keeps rising, this time up by +4.5%, to US$493,000, from US$470,600 in September. The October price is up +13% from one year ago, when it was $427,300. It is important to note that US new home prices rose sharply through all of 2021 and most of this year to date.
As for those lumber prices, compared to the same week last year when it was US$634 mfbm, the price of Western Spruce-Pine-Fir 2×4 #2&Btr KD (RL) for the week ending November 25, 2022 is down by -$170, or -26%. Compared to two years ago when it was US$620 mfbm, that week’s price is down by -$145 or -23%.