Category Archives: Finance & Economics

Wood products markets are still a grind for almost all product lines. The LVL market is lackluster, so the takeaway for density-graded veneers has slowed considerably. Plywood sales prices improved slightly over the last couple of weeks and sales volumes are consistent… US wood products market conditions shouldn’t come as a surprise considering the ISM (Institute for Supply Management) Manufacturing PMI (Purchasing Managers Index), which is an indicator of expansion or contraction in US manufacturing,  has indicated 21 monthly declines out of the last 22 periods. Manufacturing in the US is further impacted by the strength of the US dollar, which is currently at a 20-year high when compared to a basket of currencies from major trading partners.

The pulp, paper and packaging sector is often seen as staid and deeply cyclical. However, despite its seemingly unremarkable nature, medium to long-term earnings are trending upwards and global investor interest is on the rise. The packaging industry, valued at about US$1 trillion, is under increasing pressure due to concerns about waste, climate change, and sustainability. With food and beverages representing over 43% of the global packaging market and other consumer products accounting for 15%, global packaging demand is driven largely by shifts in consumer behaviour and preferences. Consequently, regulators are acting, and consumer goods companies and retailers are committing to improve the sustainability of their packaging. This shift, combined with the rise of e-commerce, is driving growth in wood-based consumer and industrial products.

Inflation eased further in August, reaching a new 3-year low despite persistent elevated housing costs. This inflation report is seen as the final key piece of data before the Fed’s meeting next week. The headline reading provides another dovish signal for future monetary policy, after recent signs of weakness in job reports. Although shelter costs have been trending downward since peaking in early 2023, they continue to exert significant upward pressure on inflation, contributing over 70% of the total 12-month increase in core inflation. As consistent disinflation and a cooling labor market bring the economy into better balance, the Fed is likely to further solidify behind the case for rate cuts, which could help ease some pressure on the housing market.

Due to slowing home construction and elevated interest rates, the count of open construction sector jobs continued to decline in July, per the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey. However, this shift lower is also consistent with a cooler overall labor market, which is a positive sign for future inflation readings and the interest rate outlook. In July, after revisions, the number of open jobs for the overall economy decreased slightly from 7.91 million to 7.67 million. This is notably smaller than the 8.81 million estimate reported a year ago. Previous NAHB analysis indicated that this number had to fall below 8 million on a sustained basis for the Federal Reserve to feel more comfortable about labor market conditions and their potential impacts on inflation. With estimates now measurably below 8 million, interest rate cuts from the Federal Reserve are at hand.

While the economy, immigration and abortion continue to grab major headlines, politicians should understand that the biggest concern for most Americans in this election season is the housing affordability crisis. And for good reason — Housing is by far the largest single expense for American households, and rising costs are putting the nation in an untenable situation. A 2024 report by Harvard’s Joint Center for Housing Studies found that a record-high 22.4 million households are paying more than 30% of their income on rent, and, among those renters, more than 12 million are paying more than half their income on housing, also an all-time high. …The Biden administration should eliminate tariffs on Canadian lumber imports that act as a tax on American homebuyers and oppose restrictive, costly and mandatory national energy code proposals that will raise housing costs while providing little energy savings to consumers.

Real gross domestic product (GDP) increased at an annual rate of 3.0 percent in the second quarter of 2024, according to the “second” estimate released by the U.S. Bureau of Economic Analysis. In the first quarter, real GDP increased 1.4 percent. The GDP estimate is based on more complete source data than were available for the “advance” estimate issued last month. In the advance estimate, the increase in real GDP was 2.8%. …The increase in real GDP primarily reflected increases in consumer spending, private inventory investment, and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased. Compared to the first quarter, the acceleration in real GDP in the second quarter primarily reflected an upturn in private inventory investment and an acceleration in consumer spending. 

Home price growth continues to decelerate, according to the S&P CoreLogic Case-Shiller Home Price Index (HPI). The HPI increased at a seasonally adjusted annual rate of 1.89% for June 2024, slowing from a revised rate of 3.28% in May. Home prices have not seen an outright decrease since January of 2023. However, 1.89% is the smallest growth in prices since February of 2023. Additionally, the growth rate has shown a generally declining trend since a peak of 9.76% in August 2023. Meanwhile, the Home Price Index released by the Federal Housing Finance Agency, recorded a decline in home prices for June. The index declined at an annual rate of -1.04% for June, decreasing from a revised 0.51% rate in May. The FHFA Index has experienced just one other decrease since August of 2022, with a decline of -1.03% in January 2024.

Sales of new homes rose unexpectedly in July, following significant revisions in the previous months data. Sales of newly built, single-family homes in July rose 10.6% to a 739,000 seasonally adjusted annual rate from significant upward revisions in June, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in July is up 5.6% from a year earlier. After the notably higher revisions for the May and June data, new home sales from January through July of 2024 are up 2.6% in 2024 compared to the same period in 2023. …New single-family home inventory in July ticked lower to a level of 462,000, down 1.1% from the previous month. Only 16.7% of inventory available for purchase consists of completed, ready-to-occupy homes (102,000), although this inventory component is up 44% from a year ago.

UNITED STATES — The housing crunch has been well documented in high-cost big cities, where rents and mortgages break the bank. Now it has moved into the rest of the country. The culprit is too little housing, and it began two decades ago. …Cities and states understand they have a housing problem. To increase the pace of construction, many have cut back regulatory barriers that make housing slow and expensive to build. …But the nation’s housing shortage isn’t only about zoning in cities. For one thing, developers everywhere find it harder to raise money, and homeowners find it harder to get loans. That’s because banks and the government, in a quest to prevent another housing bubble, have raised lending standards and made mortgages harder to get. For another, builders simply aren’t putting up subdivisions at the rate they once did. [to access the full story a NY Times subscription is required]

WASHINGTON, DC – Despite the recent pullback in mortgage rates, total home sales are expected to come in lower than previously forecast through the rest of 2024, and then not pick up meaningfully until further out in 2025, according to the August 2024 commentary from the Fannie Mae Economic and Strategic Research (ESR) Group. The ESR Group notes that purchase mortgage applications have barely budged in response to the more favorable rate environment, and high-frequency measures of home purchase demand, including mortgage applications, showing requests, and listings views, remain below year-ago levels. Additionally, the Fannie Mae Home Purchase Sentiment Index^® continues to report a near-record low share of respondents indicating it’s a “good time to buy” a home. As such, the ESR Group has downgraded its total home sales forecast to 4.78 million in 2024 and 5.19 million in 2025.

NAHB’s analysis of Census Data from the Quarterly Starts and Completions by Purpose and Design survey indicates gains for custom home building after some recent slowing. Custom home building typically involves home buyers less sensitive to changes for interest rates. There were 52,000 total custom building starts during the second quarter of 2024. This marks an almost 6% increase compared to the second quarter of 2023 and the best reading since the third quarter of 2022. Over the last four quarters, custom housing starts totaled 180,000 homes, a 5% decline compared to the prior four quarter total (189,000) due to weakness in prior quarters.

New residential construction in the U.S. saw a steep drop in the month of July, according to a report released by the Commerce Department on Friday. The report said housing starts plunged by 6.8% to an annual rate of 1.238 million in July after jumping by 1.1% to a revised rate of 1.329 million in June. Economists had expected housing starts to slump by 1.7% to an annual rate of 1.330 million from the 1.353 million originally reported for the previous month. With the sharp pullback, housing starts tumbled to their lowest level since hitting an annual rate of 1.053 million in May 2020. Single-family housing starts led the way lower, plummeting by 14.1% to an annual rate of 851,000 in July after edging down by 0.1% to rate of 991,000 in June. On the other hand, multi-family starts soared by 14.5% to an annual rate of 387,000 in July after surging by 4.6% to a rate of 338,000 in June.

A lack of affordability and buyer hesitation stemming from elevated interest rates and high home prices contributed to a decline in builder sentiment in August. Builder confidence in the market for newly built single-family homes was 39 in August, down two points from a downwardly revised reading of 41 in July. …Challenging housing affordability conditions remain the top concern for prospective home buyers, as both present sales and traffic readings showed weakness. However, with current inflation data pointing to interest rate cuts from the Federal Reserve and mortgage rates down markedly in the second week of August, buyer interest and builder sentiment should improve in the months ahead. …The HMI index charting current sales conditions in August fell two points to 44 and the gauge charting traffic of prospective buyers also declined by two points to 25. The component measuring sales expectations in the next six months increased one point to 49.

Inflation dropped below a 3% annualized growth rate for the first time since March 2021 even though housing costs continue to climb. Nonetheless, the headline reading is another dovish signal for future monetary policy, following signs of weakness in the most recent job report. Despite a slowdown in the year-over-year increase, shelter costs continue to exert significant upward pressure on inflation, contributing nearly 90% of the monthly increase in overall inflation and over 70% of the total 12-month increase in core inflation. As consistent disinflation and a cooling labor market bring the economy into better balance, the Fed is likely to further solidify behind the case for rate cuts, which could help ease some pressure on the housing market. …The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose by 0.2% in July on a seasonally adjusted basis, after declining 0.1% in June.