Category Archives: Finance & Economics

In the second quarter of 2024, the U.S. economy grew twice as fast as it did in the first quarter, supported by consumer spending and private inventory investment. Furthermore, the data from the GDP report suggests that inflation is cooling. The GDP price index rose 2.3% for the second quarter, down from a 3.1% increase in the first quarter of 2024. The Personal Consumption Expenditures (PCE) Price Index, which measures inflation (or deflation) across various consumer expenses and reflects changes in consumer behavior, rose 2.6% in the second quarter. This is down from a 3.4% increase in the first quarter of 2024. According to the “advance” estimate by the Bureau of Economic Analysis, real gross domestic product (GDP) expanded at a robust 2.8% annual pace in the second quarter of 2024. This is faster than the 1.4% gain in the first quarter of 2024. This quarter’s growth was close to NAHB’s forecast of a 2.7% increase.

Housing’s share of the economy stayed level at 16.1% in the second quarter of 2024. The share remained above 16% after staying constant at 15.9% for all of 2023. The more cyclical home building and remodeling component – residential fixed investment (RFI) – was 4.0% of GDP, level from 4.0% in the first quarter. RFI subtracted 5 basis points from the headline GDP growth rate in the second quarter of 2024, marking the first negative contributions since the second quarter of 2023. In the second quarter, housing services added 18 basis points (bps) to GDP growth while the share remained at 12.1% of GDP. Overall GDP increased at a 2.8% annual rate, up from a 1.4% increase in the first quarter of 2024, and a 3.4% increase in the fourth quarter of 2023. …Housing-related activities contribute to GDP in two basic ways: The first is through residential fixed investment (RFI). The second impact of housing on GDP is the measure of housing services.

The production index for sawmills and wood preservation industries fell at the start of 2024 to 91.9 in the first quarter (the index measures real output during 2017 at a level of 100). This is the second straight decline for the quarterly level according to the Federal Reserve’s recent release of G.17 data. The index fell 4.3% in the first quarter of 2024, after also falling 4.3% during the previous quarter. Compared to a year ago, production was 3.8% lower at the start of 2024. …The sawmill and wood preservation industry full utilization rates fell marginally for the second straight quarter, from 60.8% to 60.4%. This decline explains part of the production decline for the industry. Additionally, as average plant hours per week in operation fell for these firms, the decline was not due to an increase in production capacity of these firms but rather a decline in output as the plants were in operation for fewer hours.

Existing home sales fell for the fourth straight month in June due to lingering high mortgage rates and record-high prices, according to the National Association of Realtors. Although low resale inventory continued to push prices to another record high, the months’ supply of inventory continued to increase and reached its highest level since May 2020. Improving inventory and moderating mortgage rates are likely to ease home price growth in the months ahead. Homeowners with lower mortgage rates have opted to stay put, avoiding trading in for higher rates. …Total existing home sales, including single-family homes, townhomes, condominiums, and co-ops, fell 5.4% to a seasonally adjusted annual rate of 3.89 million in June, the lowest level since December 2023 (as shown below). On a year-over-year basis, sales were also 5.4% lower than a year ago.

WASHINGTON, DC – Home price growth in the second quarter was stronger than previously anticipated but will likely moderate soon, closing 2024 and 2025 at annual rates of 6.1% and 3.0%, respectively, according to the July 2024 commentary from the Fannie Mae Research Group (ESR). Despite a more than 30% increase in listings of homes available for sale compared to a year ago, certain indicators of housing activity remain soft. This dynamic of gradually increasing supply and affordability-constrained demand is expected to cause home prices to moderate going forward. …This contributed to the ESR Group revising downward its starts and new home sales forecasts; notably, however, it revised upward its existing home sales forecast due to a modestly lower mortgage rate path. …The ESR Group downwardly revised its inflation forecasts and now expects the CPI to end the year at 2.9% [and] now expects the Federal Reserve to cut rates in both September and December.

US mortgage rates eased last week to their lowest level since early February, while a further decline in home-purchase applications suggested even cheaper borrowing costs may be needed to stir demand. The contract rate on a 30-year fixed mortgage slipped 5 basis points to 6.82% in the week ended July 19, according to Mortgage Bankers Association data released Wednesday. An index of mortgage applications to buy a home decreased 4% to the lowest level since the end of May. While mortgage rates remain below 7%, they’re still twice as high as they were at the end of 2021. Combined with elevated home prices, many potential homebuyers have been shuffled to the sidelines, evidenced by waning sales of previously owned houses. A National Association of Realtors measure of homebuyer affordability declined for a fourth straight month in May and stood at one of the lowest levels in the group’s data back to 1989.

Stucco was the most common principal siding material for new single-family homes started in 2023 at 26.8%, according to the Census Bureau’s Survey of Construction. Stucco was followed by vinyl siding at 25.6%, fiber cement siding (such as Hardiplank) at 21.7% then by brick or brick veneer at 18.5%. Far smaller shares had wood or wood products (5.1%) and stone, rock or other stone materials (1.2%) as the principal exterior wall material. The graph shows the shares of each exterior siding since NAHB began tracking this data in 2000. The strongest trend has been the growing popularity in fiber cement siding. The share of exterior siding material for fiber cement siding has increased by five percentage points in the last ten years and by 14.2 percentage points in the past 20 years. Another major trend is the decline of vinyl siding. Although it has remained steady in recent years, this share has seen a 5.3 percentage point drop in the last ten years.

WASHINGTON – The American Forest & Paper Association (AF&PA) released its June 2024 Packaging Papers Monthly report. Total packaging papers & specialty packaging shipments in June increased 7% compared to June 2023. They were up 10% when compared to the same six months of 2023. The operating rate for unbleached packaging papers was 82.9%, up 1.1 points from June 2023 and up 4.5 points year-to-date. Shipments of the biggest subgrade in bleached packaging papers – food wrapping – were 25,500 short tons for the month of June, up 6.3% from the same month last year and down 0.9% year-to-date.

Ever since the Federal Reserve signalled that the rate-rising phase of its historic fight against inflation was over, attention has been focused on when — and how quickly — the US central bank would provide relief to American borrowers. Chair Jay Powell and his colleagues have said they need irrefutable proof that inflation is retreating to the Fed’s 2 per cent target. Until then, the Federal Open Market Committee would lack the confidence necessary to begin lowering interest rates. A string of favourable inflation data suggests that high bar has more or less been met. But the top ranks at the Fed are still hesitant to declare victory just yet. …Having more conclusive evidence in hand will be critical to assuage some officials who still harbour some scepticism that the coast is clear, especially in light of the unexpected inflation flare-up that occurred earlier this year.

The NAHB/Westlake Royal Remodeling Market Index (RMI) for the second quarter of 2024 posted a reading of 65, down one point compared to the previous quarter. The RMI remains solidly in positive territory, and NAHB continues to project that remodeling activity has stabilized at a healthy level in 2024. Although some remodelers are reporting a slowdown, most continue to see solid demand for remodeling projects. …The Current Conditions Index averaged 73, down one point from the previous quarter. …The Future Indicators Index was 58, which was down one point from the previous quarter. Quarter-over-quarter, the component measuring the current rate at which leads and inquiries are coming in decreased two points to 55 and the component measuring the backlog of remodeling jobs dropped one point to 60.

CAMBRIDGE, Massachusetts  – After a modest downturn, homeowner expenditures for improvements and repairs are expected to trend up through the first half of 2025, according to the Leading Indicator of Remodeling Activity (LIRA). The LIRA projects that declines in annual spending for renovations and maintenance to owner-occupied homes will ease to just -0.5 percent through the second quarter of 2025. “Economic uncertainty and continued weakness in home sales and the sale of building materials are keeping a lid on residential remodeling, although many drivers of spending are starting to firm up again,” says Carlos Martín, Director at the Center. …“Annual spending on homeowner improvements and maintenance is expected to reach $466 billion through the second quarter of next year, on par with spending over the past four quarters,” says Abbe Will, Associate Director. “The home remodeling slowdown should continue to be relatively mild.”

The Conference Board Leading Economic Index® (LEI) for the U.S. declined by 0.2 percent in June 2024 to 101.1 (2016=100), following a decline of 0.4 percent in May. Over the first half of 2024, the LEI fell by 1.9 percent, a smaller decrease than its 2.9 percent contraction over the second half of last year. “The US LEI continued to trend down in June, but the contraction was smaller than in the past three months,” said Justyna Zabinska-La Monica at The Conference Board. “The decline continued to be fueled by gloomy consumer expectations, weak new orders, negative interest rate spread, and an increased number of initial claims for unemployment. However, due to the smaller month-on-month rate of decline, the LEI’s long-term growth has become less negative, pointing to a slow recovery. Taken together, June’s data suggest that economic activity is likely to continue to lose momentum in the months ahead.

NEW YORK – The average interest rate on the popular U.S. 30-year fixed-rate mortgage fell to its lowest level since mid-March this week, a welcome development for a housing market struggling to find its footing and one that may continue if the Federal Reserve cuts rates as expected in the months ahead. The 30-year fixed-rate mortgage averaged 6.77% during the week ending July 18, the lowest level since mid-March, down from 6.89% in the prior week, mortgage finance agency Freddie Mac said on Thursday. It averaged 6.78% during the same period a year ago. Data shows that homebuyers are not responding to lowering rates yet with purchase application demand remaining roughly 5% below where it was in the spring, Freddie Mac’s chief economist said.

Elevated interest rates for home mortgages and construction and development loans kept single-family production and demand in check during June. Overall housing starts increased 3.0% in June to a seasonally adjusted annual rate of 1.35 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. …Within this overall number, single-family starts decreased 2.2% from an upwardly reviewed May figure to a 980,000 seasonally adjusted annual rate. However, on a year-to-date basis, single-family starts are up 16.1% thus far in 2024. …The volatile multifamily sector, which includes apartment buildings and condos, increased 19.6% in June to an annualized 373,000 pace. The general trend for apartment construction is lower however. The pace of multifamily 5-plus unit starts are down 23.4% from a year ago. And on a year-to-date basis, multifamily 5-plus unit starts are down 36.3%.

Additional coverage by US Census Bureau: US housing starts, building permits and completions rose in June

Mortgage rates that averaged 6.92% in June per Freddie Mac, along with elevated rates for construction and development loans, continue to put a damper on builder sentiment. Builder confidence in the market for newly built single-family homes was 42 in July, down one point from June, according to the NAHB/Wells Fargo Housing Market Index (HMI). This is the lowest reading since December 2023. While buyers appear to be waiting for lower interest rates, the six-month sales expectation for builders moved higher, indicating that builders expect mortgage rates to edge lower later this year as inflation data are showing signs of easing. …NAHB is forecasting Fed rate reductions to begin at the end of this year, and this action will lower interest rates for home buyers, builders and developers. And while home inventory is increasing, total market inventory remains lean at a 4.4 months’ supply, indicating a long-run need for more home construction.

New US home construction picked up in June, though a decline in single-family housing starts to an eight-month low underscored a real estate market challenged by high interest rates. Total housing starts increased 3% to a 1.35 million annualized rate last month, driven by a 19.6% surge in multifamily construction, according to government data released Wednesday. Starts of one-family homes fell for a fourth straight month. Building permits, a proxy of future construction activity, rose 3.4% to a 1.45 million annual rate, also driven by a pickup in applications for multifamily projects. Authorizations for single-family homes decreased 2.3% to the slowest pace in more than a year. The strong pace of single-family construction seen at the end of last year is fading. The report also showed the number of homes under construction dropped to the lowest level since the start of 2022, suggesting builders are focused on keeping inventory more in line with demand.

NAHB analysis of the Survey of Construction shows that 72.4% of new single-family homes started in 2023 were built on slab foundations, 16.6% were built with full or partial basements, and 9.9% with crawl spaces. The share of new homes built on slabs has risen steadily from 45.8% in 2000 to 72.4% in 2023. The largest increase occurred from 2022 to 2023, with a jump of 3.9 percentage points (pp), compared to an average increase of 1.93 pp over the previous five years. Conversely, the share of homes with full or partial basements decreased by 3.0 pp from 19.6% in 2022 to 16.6% 2023. In colder areas where building codes require foundations to be built below the frost line, most homes are constructed with full or partial basements. The divisions with a majority share of full or partial basements in new homes are West North Central (63.9%), followed by New England (62.1%), Middle Atlantic (48.1%), and East North Central (48.0%). 

Inputs to residential construction, goods less food and energy, rose 0.19% in the month of June according to the most recent producer price index (PPI) report. The index for inputs to residential construction, goods less food and energy, represents building materials used in residential construction. In May, the index fell 0.26% after rising in April 0.22%. Over the year, the index was up 2.65% in June. …The seasonally adjusted PPI for final demand goods decreased 0.55% in June, after falling a revised 0.77% in May. The seasonally adjusted PPI for softwood lumber rose 3.41% in June, after falling 5.00% in May. Prices for softwood lumber are 7.41% lower than June 2023. Lumber prices remain lower than the peaks and valleys of 2020 through 2022 but remain higher than 2019 according to the index. …The seasonally adjusted PPI for ready-mix concrete rose, up 0.45% in June after rising a revised reading of 0.26% in May. 

The University of Michigan on Friday (7-12-24), released the preliminary results of its Consumer Sentiment Index (CSI) for June. …July’s reading was a statistically insignificant 2 index points below last month, well within the margin of error. Although sentiment is more than 30% above the trough from June 2022, it remains stubbornly subdued. Nearly half of consumers still object to the impact of high prices, even as they expect inflation to continue moderating in the years ahead. With the upcoming election, consumers perceived substantial uncertainty in the trajectory of the economy, though there is little evidence that the first presidential debate altered their economic views. Year-ahead inflation expectations fell for the second consecutive month, reaching 2.9%. …The Current Economic Conditions for July dropped to a reading of 64.1 down from June’s Reading of 65.9.

Both overall and core inflation continued to slow in June, as a decline in gasoline prices offset the increase in shelter costs. This is another dovish signal for future monetary policy, following a significant downward revision to the job report. Despite a slowdown in the year-over-year increase, shelter costs continue to put upward pressure on inflation, accounting for over 60% of the total increase in core inflation. While this report indicates signs of softening prices, the Federal Reserve will require further data to confirm a consistent disinflation trend toward their 2% target before considering rate cuts. …The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) fell by 0.1% in June on a seasonally adjusted basis. This was the first monthly decline since May 2020.

WASHINGTON — Associated Builders and Contractors reported that its Construction Backlog Indicator increased to 8.4 months in June, according to an ABC member survey conducted June 20 to July 3. The reading is down 0.5 months from June 2023. …ABC’s Construction Confidence Index readings for sales and staffing levels fell slightly in June, while the reading for profit margins improved. All three readings remain above the threshold of 50, indicating expectations for growth over the next six months. “Backlog continues to hold up remarkably well despite high interest rates, inflation and emerging weakness in the broader economy,” said ABC Chief Economist Anirban Basu. “While contractor confidence regarding the outlook for sales and staffing levels fell modestly in June, all three Construction Confidence Index components are higher than they were one year ago.

Russ Taylor

During a protracted slump this year prices have remained mired below $400 per thousand board feet for 12 weeks in a row. …Russ Taylor said the sharp spike in mortgage rates and borrowing costs since 2022 have weighed down on the lumber market’s performance, and look set to keep activity muted for the foreseeable future. The “bite” of rates hovering around the 7% mark is especially impacting the repair and remodeling sector, he noted, which marks the biggest lumber consumption segment in the US. …The prospect of borrowing costs remaining higher for longer could keep the market subdued by canceling out cheaper lumber costs and deterring builders from beginning projects. …Markets are currently expecting the Federal Reserve to cut its key rate at least once before the end of the year. Taylor noted that a single mild rate cut is unlikely to do much to change buyers’ or builders’ sentiments. 

The U.S. exported 926,024.1 metric tons of wood pellets in May, up from 819,341.5 metric tons exported the previous month and 820,057.5 metric tons exported in May 2023, according to data released by the USDA Foreign Agricultural Service on July 3. The U.S. exported wood pellets to more than a dozen countries in May. The U.K. was the top destination for U.S. wood pellet exports at 654,234.4 metric tons, followed by Japan at 154,311.4 metric tons and the Netherlands at 91,973.5 metric tons. The value of U.S. wood pellet exports reached $167.35 million in May, up from $157.26 million in April and $153.12 million in May of last year. Total U.S. wood pellet exports for the first five months of 2024 reached 4.12 million metric tons at a value of $774.64 million, compared to 3.75 million metric tons exported during the same period of 2023 at a value of $690.01 million.