Category Archives: Finance & Economics

Finance & Economics

U.S. and Canadian Housing Starts Not Yet Humbled by Higher Interest Rates

By Alex Carrick
Construct Connect
September 22, 2022
Category: Finance & Economics
Region: Canada, United States

In the U.S., the Federal Reserve has just raised its key policy setting interest rate, the federal funds rate, into a range from 3.00% to 3.25%. The intent is to cool inflation. …A higher interest rate regime is meant to stamp out excessive consumer spending. But it’s also known, through corresponding bumps in mortgage rates, for almost always having a detrimental effect on residential real estate demand and new home construction. This article, with the help of 14 graphs, examines the present state of housing markets in the U.S. and Canada. There are almost certainly more interest rate increases to come in both countries. …The surprising fact is that housing starts haven’t stumbled into the ditch just yet in either country. This has been despite cries of alarm being expressed from multiple quarters.

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Lumber falls after mortgage rates solidify their move above 6% amid hawkish Fed rate hikes

By Matthew Fox
Business Insider
September 22, 2022
Category: Finance & Economics
Region: Canada, United States

Lumber prices fell 6% on Thursday, extending their two-day decline to 10% after the Federal Reserve hiked interest rates by another 75 basis points. The aggressive interest rate hikes from the Fed have helped solidify the ongoing surge in mortgage rates, which jumped above 6% for the first time since 2008. The surge in mortgage rates have taken a significant bite out of home sales, which has in-turn led to price cuts and has dented homebuilder sentiment. “The lumber market continues to be in a state of overall malaise as buyers anticipate lower overall demand going forward. Many yards are trying to pare their inventories to minimum levels and have really no fear of price upside,” Sherwood Lumber’s director of risk management Steve Loebner said. 

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Housing starts in Canada’s urban areas declined in August

By Canada Mortgage and Housing Corporation
Cision Newswire
September 16, 2022
Category: Finance & Economics
Region: Canada

OTTAWA, Ontario – The standalone monthly seasonally adjusted annual rate (SAAR) of total housing starts for all areas in Canada in August was 267,443 units, down 3% from July. The SAAR of total urban starts decreased 3% to 246,771 units in August. Multi-unit urban starts declined 4% to 187,602 units, while single-detached urban starts increased 1% to 59,169 units. Rural starts were estimated at a seasonally adjusted annual rate of 20,672 units. The six-month trend in housing starts was higher in August compared to July, despite a lower monthly SAAR. Housing starts activity remains elevated in Canada historically and have been well above 200,000 units since 2020,” said Bob Dugan, CMHC’s Chief Economist. 

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Lumber Stats: US production takes a step higher

By Paul Quinn, RBC Equity Analyst
RBC Capital Markets
September 14, 2022
Category: Finance & Economics
Region: Canada, United States

The Western Wood Products Association (“WWPA”) released June 2022 softwood lumber stats:

  • North American softwood lumber production in June was up 2.7% y/y in the US and down 8.8% y/y in Canada.
  • US operating rates rises; Canadian operating rates fall more than production
  • North American softwood lumber consumption was up 0.8% y/y, while Canadian softwood lumber consumption decreased 0.2% y/y, leaving overall North American consumption up by ~34 mmfbm y/y.
  • US softwood lumber imports increased 1.5% m/m primarily driven by Europe (+45 mmfbm; +29.5% m/m).
  • US log exports decreased 15.3% m/m to 104 mmfbm.

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Canadian building construction continued its upward trend in July

Statistics Canada
September 13, 2022
Category: Finance & Economics
Region: Canada

Investment in building construction continued its upward trend since October 2021, rising 0.8% to $21.0 billion in July. Both the residential (+1.0% to $15.7 billion) and the non-residential sectors (+0.1% to $5.3 billion) showed increases. …Investment in non-residential construction nudged up 0.1% to $5.3 billion in July. …Investment in residential building construction advanced 1.0% to $15.7 billion in July. Single-family home investment edged up 0.3% to $8.6 billion and has remained relatively stable over the five months ending in July. Multi-unit construction investment increased 1.8% to $7.1 billion for the month, with apartment projects in Ontario and British Columbia contributing significantly to the gains. On an unadjusted basis, new construction for both single-family homes and multi-unit construction have shown notable growth in the previous few months and are up 3.9% year over year in July.

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A Global Housing Bust Looms

By Enda Curran
Bloomberg
September 12, 2022
Category: Finance & Economics
Region: Canada, United States

House prices around the world are taking a hit from rising interest rates. How that housing slowdown plays out will be crucial to central banks’ efforts to guide their economies to a soft landing as they push up borrowing costs, according to Bloomberg’s Big Take today. Real estate is a leading source of household wealth and a major multiplier of economic activity. Frothy markets such as Australia, Canada and New Zealand are showing signs of a sharper cooling while some governments, such as South Korea, have already intervened to help hard-pressed consumers to manage their increasing repayments. The cooling in house prices is nothing like the scale of collapse seen during the Global Financial Crisis. …Still, policy makers are watching very carefully to gauge how this plays out.

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Value of building permits in Canada declined 6.6% in July

Statistics Canada
September 1, 2022
Category: Finance & Economics
Region: Canada

The total value of building permits in Canada declined 6.6% in July to $11.2 billion, mainly due to the residential sector, which fell 8.6% to $7.6 billion. The non-residential sector also dropped slightly by 2.1%. On a constant dollar basis (2012=100), the total value of building permits decreased 4.8% to $6.9 billion. In July, residential permits decreased 8.6% to $7.6 billion nationally. …Construction intentions in the single-family homes component declined 5.7%, as decreases in Ontario (-13.9%) more than offset the gains in six provinces. Despite the decline, this component remained 14.8% higher than the same month of 2021. The value of building permits in the multi-family homes component dropped 11.1%. Declines were posted in six provinces, with Ontario (-32.8%) reporting the largest decrease. Conversely, BC had a number of permits for condos and apartments, pushing the province’s permits value up 9.3%.

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Lumber producers are cutting back, a signal that higher interest rates are taking root

By Gabriel Friedman
The Financial Post
September 20, 2022
Category: Finance & Economics
Region: Canada, Canada West

If lumber was an early indicator of where prices are headed, then the central bankers who are now trying to beat back the hottest inflation since the 1980s may take heart in recent signals coming from the lumber market. A growing number of Canada’s largest producers, including Canfor and West Fraser Timber recently announced plans to scale back production in BC, citing softening demand among other factors. Both announcements tie into a multi-year trend in which B.C. lumber companies have been reinvesting their profits in new operations in the southern US. …As West Fraser said in August, “access to available timber is an increasing challenge in BC and ongoing transportation constraints have impaired the company’s ability to reliably access markets.” Canfor’s statement about softening lumber demand may signal that rising interest rates are beginning to have the desired effect of cooling demand. …Paul Quinn, RBC analyst, predicted Canfor’s announcement of curtailed production would “definitely raise prices.”

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US Federal Reserve raises target rate by 75 basis points, again

By Robert Dietz
NAHB – Eye on Housing
September 21, 2022
Category: Finance & Economics
Region: United States

Continuing its tightening of financial conditions to bring the rate of inflation lower, the Federal Reserve’s monetary policy committee raised the federal funds target rate by 75 basis points, increasing that target to an upper bound of 3.25%. This marks the third consecutive meeting with an increase of 75 basis points. These supersized hikes are intended to move monetary policy more rapidly to restrictive policy rates. And the Fed’s leadership has signaled they intended to hold these elevated rates for a substantial  period time, well into 2024. …Looking forward, the Fed’s “dot plot” indicates that the central bank expects the target for the federal funds rate will increase by 75 more basis points in November, 50 in December, and then concluding with 25 points at the start of 2023. This would take the federal funds top rate to to near 4.8%.. ..Among the clear signs of economic slowing are just about every housing indicator.

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Covid Era Impacts on Working from Home and Housing Market Impacts

By Jing Fu
NAHB – Eye on Housing
September 22, 2022
Category: Finance & Economics
Region: United States

While the COVID-19 pandemic has triggered many social and economic disruptions, it has also changed working arrangements and has accelerated the shift to work from home (WFH). During the COVID-19 outbreak in the early of 2020, many businesses across the United States closed and millions of workers experienced the work from home trend out of necessity. This sudden and massive work from home experiment generated major lifestyle changes for workers, homeowners, business owners, and our communities. A new NBER working paper, “Working from Home Around the World,” provides some insight into the big shift to WFH and discusses implications for workers, organizations, cities, and the pace of innovation. …It stated that full WFH days averaged 1.5 days per week across 27 countries. …While “the big shift to WFH presents challenges for dense urban centers,” it also enabled homebuyers to relocate to low-density areas that have higher housing affordability conditions.

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Economic Indicators Continue to Point to Likely Recession in 2023

Fannie Mae
September 21, 2022
Category: Finance & Economics
Region: United States

Economic growth is projected to resume in the second half of 2022, but the combination of high inflation, monetary policy tightening, and a slowing housing market is likely to tip the economy into a modest recession in the new year, according to the September 2022 commentary from Fannie Mae. The Research Group continues to forecast 0.0 percent real GDP growth on a full-year basis through 2022, but it revised downward its expectations for full-year 2023 growth by one-tenth of a percentage point to negative 0.5 percent. …Due largely to the higher mortgage rate environment, the ESR Group lowered its forecast for single-family total home sales in 2022 and 2023 to 5.71 million and 4.98 million, which would represent declines of 17.2 percent and 12.8 percent, respectively. While multifamily construction remains strong, the ESR Group also revised downward its multifamily starts forecast for 2022 to 542,000 units but continues to expect demand for rental units to remain strong because of the single-family market’s relative unaffordability.

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Fed’s Powell: U.S. housing market headed for ‘correction’

Reuters
September 21, 2022
Category: Finance & Economics
Region: United States

Jerome Powell

Federal Reserve Chair Jerome Powell said the U.S. housing market will probably go through a “correction” after a period of “red hot” price increases that have put home ownership out of reach for many Americans.  “There was a big imbalance … housing prices were going up at an unsustainably fast level,” Powell said following the Fed’s decision to raise its policy rate by another 75 basis points. “For the longer term what we need is supply and demand to get better aligned so housing prices go up at a reasonable level, at a reasonable pace and people can afford houses again. We probably in the housing market have to go through a correction to get back to that place.” The Fed’s rate hikes this year have had their biggest impact on the housing sector, slowing sales and bringing prices a bit lower. Shelter inflation will remain high for some time, Powell said.

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Which Industries Are Impacted The Most By Lumber Prices?

Forbes
September 21, 2022
Category: Finance & Economics
Region: United States

The price of lumber impacts many industries, from construction to transportation. When the real estate market cools down, fewer people spend money on home improvements and home construction, which means less demand for lumber. Lumber suppliers couldn’t keep up with the unique demand in 2021 due to supply chain issues and labor shortages. This led to the price of lumber skyrocketing. With the Fed raising interest rates, the entire economy is slowing down, influencing everything from real estate to discretionary spending. This means that folks aren’t as keen on spending money on home improvements as they were in 2021.

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NAHB expects 2022 to be the first year since 2011 to record an annual decline in single-family home building

By Jing Fu
NAHB – Eye on Housing
September 20, 2022
Category: Finance & Economics
Region: United States

In August, housing starts rebounded but housing permits declined for the second straight month. The August drop in building permits indicates that the housing market is continues to cool. …Overall housing starts rose 12.2% to a seasonally adjusted annual rate of 1.58 million units in August. Single-family starts increased 3.4% to a 935,000 seasonally adjusted annual rate and are down 4% on a year-to-date basis. Declines are expected ahead, as single-family permits decreased 3.5% to an 899,000 annualized rate and are down 6.6% on a year-to-date basis. …The multifamily sector increased 28% to an annualized 640,000 pace. Multifamily construction remains very strong given solid demand for rental housing. The number of multifamily 5+ units currently under construction is up 26.5% year-over-year. Multifamily development is being supported by a substitution effect, with frustrated or priced out prospective home buyers seeking rental housing.

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Builder Confidence Falls for Ninth Straight Month as Housing Slowdown Continues

By Robert Dietz
The NAHB Eye on Housing
September 19, 2022
Category: Finance & Economics
Region: United States

In another sign that the slowdown in the housing market continues, builder sentiment fell for the ninth straight month in September as the combination of elevated interest rates, persistent building material supply chain disruptions and high home prices continue to take a toll on affordability. Builder confidence in the market for newly built single-family homes fell three points in September to 46, the lowest level since May 2014 with the exception of the spring of 2020, according to the NAHB/Wells Fargo Housing Market Index (HMI). …In another indicator of a weakening market, 24% of builders reported reducing home prices, up from 19% last month. Builder sentiment has declined every month in 2022. …All three HMI components posted declines in September. Current sales conditions dropped three points to 54, sales expectations in the next six months declined one point to 46 and traffic of prospective buyers fell one point to 31

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US housing starts unexpectedly jump 12.2% in August but building permits drop

By Geoffrey Smith
Investing.com
September 20, 2022
Category: Finance & Economics
Region: United States

New U.S. home construction unexpectedly surged in August, but a decline in building permits underscores how rising interest rates are continuing to cool overall demand for housing. Housing starts climbed 12.2% last month to an annual rate of 1.575 million units, according to new Commerce Department data released on Tuesday. That’s above Refinitiv economists’ forecast for a pace of 1.445 million units. The increase stemmed from a jump in multi-family housing construction, evidence that rising borrowing costs combined with steep home prices are pushing potential homebuyers out of the market.  Applications to build – which measures future construction – slowed to an annual rate of 1.52 million units, which is the lowest since June 2020. …The interest rate-sensitive housing market has started to cool noticeably in recent months as the Federal Reserve moves to tighten policy at the fastest pace in three decades.

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Decline in Single-Family Permits in July 2022

By Danushka Nanayakkara-Skillington
NAHB – Eye on Housing
September 16, 2022
Category: Finance & Economics
Region: United States

Over the first seven months of 2022, the total number of single-family permits issued year-to-date (YTD) nationwide reached 645,877. On a year-over-year (YoY) basis, this is a 5.3% decline over the July 2021 level of 681,949. Year-to-date ending in July, single-family permits declined in all four regions. …Multifamily permits posted increases in all four regions. …Year-to-date, ending in July 2022, the total number of multifamily permits issued nationwide reached 394,215. This is 20.0% ahead over the July 2021 level of 328,483.

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Gypsum Products, Transformers, and Concrete Prices Post Historic 12-Month Increases

By David Logan
NAHB – Eye on Housing
September 14, 2022
Category: Finance & Economics
Region: United States

The prices of building materials rose 0.5% in August (not seasonally adjusted) even as softwood lumber prices decreased 5.2%, according to the latest Producer Price Index (PPI) report. Building materials prices have climbed 4.9% through the first eight months of 2022 and 14.3% over the past year. The PPI for goods inputs to residential construction, including energy, decreased 0.9% in August following a 1.5% decline in July. …The PPI for gypsum building materials rose 3.3% in August—the seventh monthly increase in 2022. …The PPI for ready-mix concrete (RMC) gained 1.6% in August, its fifth consecutive increase and has 21st monthly gain over the past two years. …The PPI for softwood lumber (seasonally adjusted) declined 5.2% in August. Softwood lumber prices have fallen four of the past five months by a total of 37.7%. its first increase in four months. …Steel mill products prices decreased 5.7% in August following a 3.9% decline in July.

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US Inflation Remains Near 40-Year High

By Fan-Ku Kuo
NAHB – Eye on Housing
September 13, 2022
Category: Finance & Economics
Region: United States

Consumer prices eased in August for the second-straight month as declines in energy prices offset increases in food and shelter indexes. Despite this slight improvement, inflation remains above an 8% year-over-year rate for the sixth straight month. The food index recorded its largest annual gain since May 1979 as all six major grocery store food group indexes increased. Though it is likely that both core PCE and CPI measures of inflation have peaked, the Fed is expected to remain aggressive with respect to tightening monetary policy.Most component indexes continued to rise in August. … The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.7% in August, following an increase of 0.5% in July. 

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Japanese pulpmills increased their wood chip imports in 2022

By Håkan Ekström
Forests2Market Blog
September 12, 2022
Category: Finance & Economics
Region: United States, International

Japan is the world’s second-largest importer of wood chips behind China, accounting for about one-third of the world’s total imports. While China is a relative newcomer in the overseas wood chip market, pulpmills in Japan have a long history of relying on imported wood fiber. The all-time high was almost 15 million odmt back in 2008, followed by a long period when total volumes averaged around 12 million odmt annually. The most significant y-o-y decline in 10 years occurred in 2020 when wood chip import demand in Japan fell to its lowest level since the first year of the COVID-19 epidemic. However, importation grew in 2021 and the first six months of 2022, with the total volume for 2022 on pace to reach the highest level in three years. About 85% of wood chip shipments to Japan have been hardwood species, predominantly from the US and Australia.

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Non-site built housing has been declining since the early 2000s despite high-level interest

By Danushka Nanayakkara-Skillington
NAHB – Eye on Housing
September 8, 2022
Category: Finance & Economics
Region: United States

The total market share of non-site built single-family homes (modular and panelized) was at 2% of single-family completions in 2021, according to Census Bureau Survey of Construction data and NAHB analysis. This share has been steadily declining since early-2000s despite the high-level of interest for non-site built construction. In 2021, there were 24,000 total single-family units built using modular (10,000) and panelized/pre-cut (14,000) construction methods, out of a total of 970,000 total single-family homes completed. …This 2% market share for 2021 represents a decline from years prior to the Great Recession. In 1998, 7% of single-family completions were modular (4%) or panelized (3%). …One notable regional concentration is found in the Midwest where 6% (7,000 homes) of the region’s 125,000 housing units were completed using non-site build construction methods, the highest share in the country.

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US total construction starts up 48% in July, residential starts fell 8%

Electrical Construction & Maintenance
September 8, 2022
Category: Finance & Economics
Region: United States

Total construction starts rose 48% in July to a seasonally adjusted annual rate of $1.36 trillion, according to Dodge Construction Network. This gain results from the start of three large manufacturing plants and two LNG export facilities. However, even without these projects, total construction starts would still have increased 7%. Nonresidential building starts rose 79% in July, and nonbuilding starts jumped 120%, conversely residential starts decreased 8%. …Residential building starts fell 8% in July to a seasonally adjusted annual rate of $391.9 billion. Single family starts lost 9%, and multifamily starts were 5% lower. Through the first seven months of 2022, residential starts were 1% higher than that of the same timeframe in 2021. Multifamily starts were up 24%, while single family housing slipped 7%. 

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We could see slow economic growth for the rest of the decade

By Gad Lavanon
CNN Business
September 8, 2022
Category: Finance & Economics
Region: United States

So far this year, the US economy has managed to skirt a recession, despite what many experts predicted. But even while the labor market remains strong, there isn’t much to celebrate in the foreseeable future. We could still very well find ourselves in a recession over the next 12 months, with limited economic growth and lower prospects for improvement in Americans’ standard of living that could linger for the rest of the decade. Here’s why:

  • Consumer spending on services will start to slow – spending on consumer services is growing rapidly and keeping the economy above water.
  • The impact of rising interest rates – in its fight to tame inflation the Federal Reserve will continue to rapidly raise interest rates. 
  • Labor shortages will persist – The worker shortage isn’t just a temporary problem, but rather the result of several long-term demographic and labor market trends converging with the pandemic.

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Can You Afford to Hoard? Toilet Paper Costs Are Spiraling

By Javier Blas
Bloomberg
September 6, 2022
Category: Finance & Economics
Region: United States, International

Who would have thought? It turns out hoarding toilet paper in the early days of the pandemic was a wise financial decision. If your bathroom cupboard is still stockpiled with rolls, you don’t have to feel ashamed anymore. The toilet paper shortage of 2020 was an early warning sign of the large supply-chain disruptions that the global economy was about to suffer. Now wholesale tissue paper prices are surging to an all-time high — a new crisis that indicates inflationary pressures are still building up. The toilet-paper industry is a microcosm of the much larger, energy-intensive manufacturing sector, where production costs are continuing to skyrocket in line with soaring wholesale energy prices. It’s the same issue across European industrial commodities — from glass, ceramics and synthetic fibres to aluminum, cement, fertilizer and dozens of other daily-life goods. …As is true for many manufacturers, the core of the problem for toilet paper is the cost of energy.

 

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Shift for Homes Built in Low-Density and Low-Cost Markets Since the Pandemic

By Na Zhao
NHAB – Eye on Housing
September 6, 2022
Category: Finance & Economics
Region: United States

The most recent Home Building Geography Index shows that home building activities have shifted to low-density and low-cost markets since the beginning of COVID-19. The market share for single-family constructions in large metro core and inner suburbs has declined from 44.5% to 41.6% from the 4th quarter of 2019 (pre-COVID), to the 2nd quarter of 2022. Housing demand has shifted from these higher density core areas to low density markets, where homes are larger and more affordable. Homebuyers desired more personal space for work-from-home and remote learning. …Declines in housing affordability also drove homebuyers to low-density outer markets. …Single-family home building in outer counties in large and medium sized metros expanded to a 19% market share in the 2nd quarter of 2022 from 17.4% in the pre-COVID period. Meanwhile, the market share of new single-family constructions in rural areas increased from 9.4% to 10.4%. Similar decentralizing trends also hold for multifamily home building.

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The housing market correction is far from over—mortgage rates spike back over 6%

By Lance Lambert
Fortune Magazine
September 2, 2022
Category: Finance & Economics
Region: United States

This spring, the Fed dusted off the ole inflation-fighting playbook to curtail inflation. The housing correction phase, of course, has already begun. Regardless of what you call it—a housing correction, housing recession, or housing downturn—it is far from over. Just look at mortgage rates. Heading into the year, the average 30-year fixed mortgage rate sat at 3.1%. That’s long gone. On Thursday, it climbed to 6.23%—the second highest mortgage rate reading of 2022. …Earlier this week, Goldman Sachs released a revised forecast. The investment bank now projects that housing GDP will fall 8.9% in 2022, and another 9.2% in 2023. That’d mark the first housing downturn of the post-Great Financial Crisis era. The culprit? The affordability crunch (see chart below) caused by spiking mortgage rates.

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Wood Pellets Can Help Alleviate Energy Pressures Amid War, Uncertainty

By John Greene
Forests2Market Blog
September 1, 2022
Category: Finance & Economics
Region: United States, International

As the Wall Street Journal recently reported, the ongoing war in Ukraine has pinched trade flows of the increasingly valuable supply of industrial wood pellets. …Demand has put upward price pressure on pellets originating in the US South… [and] U.S. export volume has climbed steadily over the past decade. …To help meet this growing demand, Enviva—the largest export wood pellet producer in the US—announced plans earlier in the year to double its wood pellet production capacity over the next five years. …Analysts say changes in government policies are one of the biggest threats to Enviva and others in the pellet business. The European Parliament’s environmental committee in May voted to stop encouraging the burning of woody biomass by eliminating its eligibility for renewable-power subsidies and changing how emissions are counted, but the full parliament would need to sign on to change the rules.

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Wall Street-backed players boost build-to-rent market

By Bill Conroy
Housing Wire
August 31, 2022
Category: Finance & Economics
Region: United States

Toronto-based Tricon Residential, which oversees a portfolio of more than 33,000 single-family rental homes in the United States and Canada, is once again teaming up with the Arizona State Retirement System (ASRS) to invest $500 million to build 2,500 single-family rentals in the U.S. Sun Belt. This latest deal represents the second joint venture between Tricon and ASRS. In 2019, they teamed up to make a $450 million equity commitment to develop 2,000 new “build-for-rent” homes. “The United States has a housing crisis that cannot be ignored,” said Gary Berman, CEO. “Americans are facing a shortage of nearly four million homes, and families are struggling to find and afford quality housing. …The surge in build-for-rent single-family housing is coming at a time when there has been a sharp decline overall in single-family home construction according to NAHB.

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Why housing is the key to the next Fed pivot

By Ian Harnett
The Financial Times
September 1, 2022
Category: Finance & Economics
Region: United States

Investors are desperate for signals about any “pivot” by the Federal Reserve. It may be that US housing will be more important in forcing the Fed to ease than either inflation, or unemployment. Over the last century, housing has helped define the swings in the economic cycle, being a key driver of investment, employment, and consumption. As one recent research paper put it. “Housing IS the Business Cycle”. …Historically, US rate cycles typically only turn as the Fed is forced into easing by financial crisis. It is unlikely that this time will be different. Given the importance of housing for the US economy and markets, perhaps it is time for the Fed and other central banks to follow the Reserve Bank of New Zealand, and explicitly add housing into their policy mandates.

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Lumber prices decline to a new 2022 low as Goldman warns housing market has further room to fall

By Matthew Fox
Business Insider
August 30, 2022
Category: Finance & Economics
Region: United States

Lumber prices fell to a new 2022 low on Tuesday as higher mortgage rates continue to weigh on a slowing housing market. The essential building commodity fell as much as 4% on Tuesday to $465 per thousand board feet, decisively below the low seen in early August of $470.  While the decline in lumber may be seen by some as a positive sign that inflation is continuing to cool, it is also indicative of a housing market slowdown. And Goldman Sachs expects just that… home sales are set to decline further after already cooling significantly since the Fed began its interest rate hikes, which sent mortgage rates soaring above 5%. …The bank expects existing home sales to fall 12% in August, while it expects new home sales to be flat. Home prices have remained relatively resilient even as sales have cooled down. But Goldman expects that to change soon.

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Stucco and Vinyl were the Most Common Siding Materials on New Homes in 2021

By Ashok Chaluvadi
NAHB – Eye on Housing
August 29, 2022
Category: Finance & Economics
Region: United States

According to the annual data from the Census Bureau’s Survey of Construction, stucco was the most common principal siding material on new single-family homes started in 2021 (28%),  followed by vinyl siding (24%), fiber cement siding (23%) and, brick or brick veneer (19%). Far smaller shares of single-family homes started last year had wood or wood products (4%) and stone, rock or other stone materials (1%) as the principal exterior wall material. …Vinyl siding was used on 74% of the new homes started in the Middle Atlantic, 66% in New England, 63% in the East North Central and 45% in the West North Central. …Stucco was the most commonly used primary exterior wall material in the Pacific, Mountain and South Atlantic divisions in 2021. Brick or brick veneer was the most common exterior siding material in East and West South Central divisions.

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Southern Yellow Pine Lumber Prices Stabilize; Is More Volatility Around the Corner?

By John Greene
Forests2Market Blog
September 19, 2022
Category: Finance & Economics
Region: United States, US East

By late June, the price for finished southern yellow pine (SYP) lumber had tumbled 59% from its 2022 high mark of $1,136/MBF. Prices then subsequently bounced back, but weekly price movement has been between ~$100 for the last 12 weeks. Forest2Market’s composite SYP lumber price for the week ending September 9 was $488/MBF, a 2.4% decrease from the previous week’s price of $500/MBF, but a 14.9% increase over the same week last year. Price movement over the last 12 weeks has been muted compared to 1Q and 2Q suggesting there is now some stability in the supply/demand relationship as well as a new floor price in the +/-$470/MBF range. …Forest2Market’s data suggests that flat/decreasing demand from the home construction sector and expanded mill inventories have created a market that is better attuned to current needs. This should limit substantial price reactions in either direction and provide some much-needed stability. But for how long?

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Southern Timber Prices Plummeted in Q2, 2022

By Nella Cole
Forests2Market Blog
September 7, 2022
Category: Finance & Economics
Region: United States, US East

After hitting a 15-year peak in 1Q2022, the weighted average price for southern timber turned sharply lower in 2Q as prices for every product dropped during this period. While stumpage prices were up +7% year-over-year (YoY), they were down -13% quarter-over-quarter (QoQ) in 2Q. Both hardwood (HPW) and pine pulpwood (PPW) pricing began collapsing in 1Q2022 and the trend continued in 2Q. Southwide prices for PPW plummeted -17% QoQ, which reflected the steep decrease witnessed in two of three regions for this product. Prices in the East-South were down -14%, prices in the Mid-South dropped -22%, but prices in the West-South jumped +19%.

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2Q, 2022 Global Forest Markets & Price Performance

By Håkan Ekström
Wood Resources International
September 20, 2022
Category: Finance & Economics
Region: International
  • Timber Markets – A halt in Russian log exports and reduced wood demand in China contributed to a 20% decline in international softwood log trade in 1H22.
  • Wood Fiber Markets – Tight wood fiber supply, low pulp inventories, and record high market pulp prices have pushed the costs for pulplogs and wood chips up over the past year. The global Hardwood Fiber Price Index jumped 5.3% (QoQ) in 2Q22.
  • Pulp Markets – Prices for all the primary pulp grades reached new highs in 2Q22.
  • Lumber Markets – Global trade of softwood lumber fell about 10% in the first half of 2022. Most of the decline was driven by lower lumber demand in China, the US, and Germany.
  • Biomass Markets – Russia’s war in Ukraine has shaken up the European pellet market… pushing wood pellet prices to extremely high levels.

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Wood pellet shortages in France cause prices to soar

By Hannah Thompson
The Connexion
September 15, 2022
Category: Finance & Economics
Region: International

The price of wood pellets is soaring in France due to a growing shortage of the wood-burning stove and pellet stove fuel as people prepare early for winter and more households entering the wood pellet market. People who rely on the fuel may be facing an expensive winter if the trend continues, with stocks currently seeing “a risk of tension”. Propellet, the national wood pellet professionals group l’Association nationale des professionnels du chauffage aux granulés de bois, said that although “we are not yet in a total shortage situation, we are seeing a situation at risk of tension”. Demand rose earlier than usual this year, ahead of the start of the 2022 production. …Another factor is that more people are entering the pellet market every year. 

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Value of Russian plywood exports to U.S. jumps 68% while volumes contract 8%

The Lesprom Network
September 8, 2022
Category: Finance & Economics
Region: International

For the first seven months of 2022 the value of Russian plywood exports to the U.S. jumped 68% to $222 million, while export volume contracted 8% year-on-year to 264 thousand m3. The average plywood supply price jumped by 83% year-on-year to $842 per m3, according to Lesprom Analytics. Since April 9, 2022, the U.S. has canceled the most favored nation treatment in trade with Russia and Belarus. The average tariff on imports of products from these countries to the U.S. increased from 3.3% to 32.3%, while for plywood it reached 40-50%. After the abolition of the most favored nation regime in trade, in May-July, the volume of supplies fell by 62%, and the value decreased by 48%. …The exports of lumber from Russia to the U.S. declined 38% year-on-year to 42 thousand m3 in January-July. The value of exports fell 14% to $22 million. Average price of lumber jumped 38% to $531 per m3.

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Finland reduced industrial roundwood removals by 5% in July

The Lesprom Network
August 31, 2022
Category: Finance & Economics
Region: International

FINLAND — In July 2022, a total of 3.2 million m3 of roundwood was harvested for industrial use in Finland. This removal volume was down 5% from the previous year and 1% from the five-year July average, according to the Natural Resources Institute Finland (Luke). Sawlog removals were 1.3 million and pulpwood removals 1.9 million m3. Compared with the average in July in the previous five years, sawlog removals were same level and pulpwood removals 2% lower. Industrial roundwood removals from non-industrial private forests were 2.5 million m3, down by 7% from the year before.

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US wood pellet exports fall in July but are up 20% year-to-date

By Erin Voegele
Biomass Magazine
September 7, 2022
Category: Finance & Economics

The U.S. exported 649,185.7 metric tons of wood pellets in July, down from 832,092.2 metric tons the previous month, but up when compared to the 546,519.1 metric tons exported in July 2021, according to data released by the USDA Foreign Agricultural Service on Sept. 7. The U.S. exported wood pellets to more than a dozen countries in July. The U.K. was the top destination for U.S. wood pellet exports, at 345,802.4 metric tons, followed by the Netherland at 166,974.5 metric tons and Japan at 45,102 metric tons. …Total wood pellet exports for the first seven months of 2022 reached nearly 4.97 million metric tons at a value of $851.09 million, compared to 4.12 million metric tons exported during the same period of last year at a value of $596.7 million.

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Lumber could crash but a recession may cause it to rally next spring

By Andrew Hecht
The Globe and Mail
September 1, 2022
Category: Finance & Economics

As the winter approaches, new home construction tends to decline, weighing on lumber demand. There is an element of seasonality in the lumber market as it reached the $448 low in August 2021 with the fall and winter on the horizon. However, in 2022, the upcoming offseason faces rising interest rates. At the end of 2021, thirty-year fixed-rate mortgage rates were below the 3% level, and they recently were over 6%. …As the central bank’s policies have consistently been reactive instead of proactive, they run the risk of suddenly reversing to a more dovish stance if GDP continues to decline. The Fed continues to utter hawkish squawks, but the dovish coos could be on the horizon. Lumber prices will likely continue to be highly sensitive to interest rates and could provide signals for other commodity prices. …The trend remains lower in early September, but wood prices will follow the economic data over the coming months.

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US Private Residential Spending Slides in July

By Na Zhao
NAHB – Eye on Housing
September 1, 2022
Category: Finance & Economics

Private residential construction spending declined further in July, as rising mortgage rates and elevated construction costs put a damper on the market. It fell 1.5% in July, down for the second straight month, according to NAHB’s analysis of the Census Construction Spending data. Private residential construction spending was 14.1% higher year-over-year. The monthly declines are largely attributed to lower spending on single-family and multifamily. Spending on single-family construction dropped 4% in July, as single-family starts fell to the lowest reading since June 2020 and builder confidence plunged in July. Multifamily construction spending edged down by 0.6% in July, after an increase of 0.6% in June.

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