For the moment it seems the North American construction framing dimension softwood lumber market has found a supply-demand balance, as the benchmark price drops slightly but many others remain flat.
Benchmark Softwood Lumber Prices April & US Housing Starts March: 2022
In the week following Easter, which is a big-deal holiday in Canada, sawmills and wholesalers seemed to find good price levels which attracted back customers who may have been waiting to book purchases. Suppliers reported robust sales on continued plump inventories, while buyer enthusiasm pushed sawmill order files into early May. Good spring weather brought increased construction activity in many markets across the US, while Canada had quite a bought of cold weather and snow. This will melt quickly though, and building will soon move into high gear across Canada as well.
Total housing starts in the US for March 2022 increased by +0.3% from February, to a seasonally adjusted annual rate of 1.793 million units. This is an almost +4% improvement from the same month one year ago, when it was 1.725 million.
Meanwhile, March permits for future homebuilding were also almost flat, up +0.4% from the previous month, to 1.873 units, compared to 1.865 million in February. March 2021 permits are up +6.7% compared to one year ago, when it was 1.755 million.
The backlog of houses approved for construction that are yet to be started increased by +2.9% to yet another an all-time high of 280,000 units in March. Indeed, the number of single-family properties under construction continued to climb, reaching 811,000 — the most since 2006. Such a backlog points to a robust pipeline of work for builders in the months ahead.
When looking at inventory of homes-on-the-market, it is important to note that existing home sales, which comprises over 88% of total sales, has few homes on the market. This strongly suggests continued new home building activity.
Benchmark Softwood Lumber Commodity Western Spruce-Pine-Fir Price: April 2022
March starts of single-family housing, the largest share of the market and construction method which uses the most wood, was 1.200 million annualized, down by -1.7% compared to February, when it was 1.221 million. Building permits are generally submitted two months before the home building is begun, so this data is as indicator of May construction activity. After showing big jumps year-over-year for most of the past year, March 2022 single-family starts are down -4.4% compared to one year ago when they were 1.255 million units.
Looking at lumber prices, dropping slightly from the previous week, for the week ending April 22, 2022 the price of benchmark softwood lumber item Western Spruce-Pine-Fir 2×4 #2&Btr KD (RL) was US$1,060 mfbm, down -$36, or -3%, from the previous week when it was $1,096, said forest products industry price guide newsletter Madison’s Lumber Reporter. That week’s price is down by -$323, or -23% from one month ago when it was $1,383.
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.
US Housing 1-Unit Starts & Permits March & Benchmark Softwood Lumber Prices April: 2022
Back to the US housing market, the preliminary national NAHB/Wells Fargo Housing Market Index (HMI) index dropped to a seven-month low in April, with builders blaming the “jump in mortgage rates and persistent supply chain disruptions.”
Goldman Sachs estimates that housing starts will increase +5% to 1.7 million this year, arguing that “when housing markets are tight, like they are today, homebuilders are likely to keep building because they should have little fear that homes will sit vacant after completion.”
There is strong demand for rental accommodation, with the economy fully reopened following disruptions earlier in the COVID-19 pandemic. Rents increased by the most in 20 years on an annual basis in March, while the rental vacancy rate in 4Q 2021 was the lowest since mid-1984.
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
When compared to the same week last year, when it was $1,330, for the week ending April 22, 2022 the price of Western Spruce-Pine-Fir 2×4 is down by -$270, or -20%. Compared to two years’ ago when it was US$336 mfbm, this price is up by +$724, or +215%.
Madison’s Benchmark Top-Six Softwood Lumber and Panel Prices: Historical Perspective
