Category Archives: Finance & Economics

NAHB analysis of Census data shows that private residential construction spending rose 0.2% in January 2024, the second month of gains in a row. It stood at a seasonally adjusted annual pace of $900.8 billion. The monthly increase in total construction spending is attributed to more single-family construction. Spending on single-family construction rose 0.6% in December. This is the ninth consecutive monthly increase since April 2023. It is aligned with the strong reading of 1.33 million single-family starts in January, as the lack of existing home inventory is boosting new construction. Compared to a year ago, spending on single-family construction is 12.5% higher. Multifamily construction spending went down 0.4% in January after an increase of 0.4% in December, as a large stock of multifamily housing is under construction. Private residential improvement spending inched down 0.1% in January and was 3.7% lower compared to a year ago.

In 2023, an additional 1.7 million households formed, resulting in a total of 17.2 million new households between 2012 and 2023. Homebuilders started construction on 947,200 single-family homes and 472,700 multi-family homes in 2023, bringing the 2012 to 2023 overall housing starts total to 14.7 million homes, roughly 10 million of which were single-family. As household formations outpaced housing starts in 2023, the gap between total housing starts and household formations widened from 2.3 million housing units between 2012 and 2022 to 2.5 million units at the end of 2023. The gap between single-family housing starts and household formations grew from 6.5 million at the end of 2022 to 7.2 million at the end of 2023 as household formations remained steady and single-family home construction waned. Though the gap widened, it was the third smallest single-year gap between households and housing starts since 2016. This trend of underbuilding relative to household formation carried over to homeowner vacancy rates as well as rental vacancy rates.

The U.S. hardwood industry has undergone substantial changes in recent years. The domestic furniture sector and consumption of hardwood lumber for construction have declined due to the Great Recession. However, exports have emerged as a vital cushion that is preventing a more extensive decrease in hardwood lumber production and mitigating economic impacts on the industry. …Hardwood lumber exports expanded by 2.5 million cubic meters between 1990 and 2017 and peaked at 4.5 million cubic meters in 2017. Despite a subsequent decline of 1.1 million cubic meters, exports in 2021 remained 73% higher than in 1990. …In the 1990s, Europe was a dominant export destination, but the 21st century brought a remarkable increase in the China/Hong Kong/Vietnam region’s importance as an export hub. By 2017, the CHV region had surged ahead and accounted for almost 65 percent of U.S. hardwood exports. This shifting landscape had implications for different hardwood species. 

Real gross domestic product increased at an annual rate of 3.2% in the fourth quarter of 2023, according to the “second” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 4.9%. The GDP estimate released today 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 3.3 percent. The update primarily reflected a downward revision to private inventory investment that was partly offset by upward revisions to state and local government spending and consumer spending.

National home prices continued to increase, hitting a new all-time high in December. Despite high mortgage rates, limited inventory and strong demand continued to push up home prices. Locally, six of 20 metro areas, experienced negative home price appreciation in December. The S&P CoreLogic Case-Shiller U.S. National Home Price Index (HPI), reported by S&P Dow Jones Indices, rose at a seasonally adjusted annual growth rate of 2.4% in December, slower than a 3.0% increase in November. It marks the fourth straight month of deceleration since September. Nonetheless, national home prices are now 70% higher than their last peak during the housing boom in March 2006.

The Conference Board Consumer Confidence Index® fell in February to 106.7 (1985=100), down from a revised 110.9 in January. February’s decline in the Index occurred after three consecutive months of gains. However, as January was revised downward from the preliminary reading of 114.8, the data now suggest that there was not a material breakout to the upside in confidence at the start of 2024. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell back to 147.2 (1985=100) in February from 154.9 in January. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—slipped to 79.8 (1985=100), down from a revised 81.5 in January. An Expectations Index reading below 80 often signals recession ahead. “The decline in consumer confidence in February interrupted a three-month rise, reflecting persistent uncertainty about the US economy,” said Dana Peterson, Chief Economist at The Conference Board.

Major mill operators forecast a year of recovering demand in the containerboard market, translating to a greater need for the OCC and other fiber grades needed to supply those paper machines. In recent earnings reports and calls with investors, representatives from the largest publicly traded fiber companies in North America discussed their projections for the recycled fiber market. They also touched on investments to improve recycled fiber processing capacity, reported their latest recycling tonnages and more. …Packaging Corporation of America CEO Mark Kowlzan said the company is taking steps to “manage our expectations in the first half of 2024 for continued strong demand.” …During the company’s Jan. 25 earnings call, Bob Mundy, chief financial officer, noted the company anticipates higher recycled fiber prices will continue during the first quarter of 2024. Executives at International Paper agree.

Stable mortgage rates at the beginning of 2024 helped new home sales to increase in January. Sales of newly built, single-family homes in January increased 1.5% to a 661,000 seasonally adjusted annual rate from a downwardly revised reading in December, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in January is up 1.8% from a year earlier. …New single-family home inventory in January remained elevated at a level of 456,000, up 3.9% compared to a year earlier. This represents an 8.3 months’ supply at the current building pace. A measure near a six months’ supply is considered balanced. …The median new home sale price in January was $420,700, up 1.8% from December, but down 2.6% compared to a year ago. In terms of affordability, the share of entry-level homes priced below $300,000 has been steadily falling in recent years. 

Fannie Mae’s February economic forecast calls for a steady decline in inflation while both GDP growth and employment growth remain positive, if subdued. The housing forecast predicts that multifamily starts will be higher in 2024 but lower in 2025 than they predicted last month. …The largest modification from last month’s forecast was a call for 29,000 (annualized) additional multifamily starts in Q2 2024. …Fannie Mae’s forecasters are predicting that the Federal Reserve will cut the Fed Funds rate by a total of 70 basis points in 2024 and by another 70 basis points in 2025, ending 2025 at a rate of 3.7 percent. …Fannie Mae now expects single-family starts to be 1,014,000 units in 2024, up 25,000 units from the level forecast last month. Single-family starts in 2025 are forecast to be 1,053,000 units, up 7,000 units from the level forecast last month. The Fannie Mae February forecast can be found here.

With home building volumes lower, labor shortages have eased considerably since record levels set in 2021 but remain relatively widespread in a historic context, according to results from the latest NAHB/Well Fargo Housing Market Index (HMI) survey. The February 2024 HMI survey asked builders about shortages in 16 specific trades. The percentage of builders reporting a shortage (either some or serious) of labor they employ directly ranged from a low of 33% for landscape workers to a high of 65% for those performing finished carpentry. The finished carpentry shortage was down from 72% in 2023 and an all-time high of 85% in 2021. …The February 2024 HMI survey also collected information about shortages of subcontractors. The percentage of builders reporting a shortage of subcontractors ranged from 35% for building maintenance managers to 63% for finished carpenters.

Confidence in the market for new multifamily housing was in negative territory for the fourth quarter, according to results from the Multifamily Market Survey (MMS) released today by the National Association of Home Builders (NAHB). The MMS produces two separate indices. The Multifamily Production Index (MPI) had a reading of 41 – below the break-even point of 50 – while the Multifamily Occupancy Index (MOI) reading was 77. Financing new multifamily projects continues to be difficult due to tight lending standards and the high cost of development loans. Given that, along with the historically high level of supply for multifamily units under construction, NAHB forecasts a major pullback in multifamily starts for 2024.

The missing middle construction sector includes development of medium-density housing, such as townhouses, duplexes and other small multifamily properties. The multifamily segment of the missing middle (apartments in 2- to 4-unit properties) has disappointed since the Great Recession. For the fourth quarter of 2023, there were just 4,000 2- to 4-unit housing unit construction starts. This is flat from a year prior. As a share of all multifamily production, 2- to 4-unit development was just above 4% of the total for the fourth quarter. In contrast, from 2000 to 2010, such home construction made up a little less than 11% of total multifamily construction. Construction of the missing middle has clearly lagged during the post-Great Recession period and will continue to do so without zoning reform focused on light-touch density.

WASHINGTON — Existing home sales and new single-family housing starts are expected to grow modestly in 2024 amid lower mortgage rates and slowly strengthening homebuyer sentiment, according to the February 2024 commentary from the Fannie Mae Economic and Strategic Research (ESR) Group. While housing affordability is still seriously constrained following the home price run-up of the past few years, the supply of existing homes available for sale is finally showing signs of loosening. Additionally, more households have recently signaled that they expect mortgage rates to decline. …The ESR Group’s latest forecast sees mortgage rates falling to 5.9 percent by the end of 2024 and 5.7 percent by the end of 2025, both slight upticks compared to last month’s forecast. Additionally, it expects single-family starts to trend upward in 2024 despite the pullback this past month, as permits have increased for twelve consecutive months and demand for new homes remains robust.

An expected impact of the virus crisis was a need for more residential space, as people use homes for more purposes including work. Home size correspondingly increased in 2021 as interest rates reached historic lows. However, as interest rates increased in 2022 and 2023, and housing affordability worsened, the demand for home size has trended lower. According to fourth quarter 2023 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area came in at 2,156 square feet, the lowest reading since the beginning of 2010. Average (mean) square footage for new single-family homes registered at 2,374 square feet.

WASHINGTON – The American Forest & Paper Association (AF&PA) released its January 2024 Packaging Papers Monthly report. Total packaging papers & specialty packaging shipments in January decreased 4% compared to January 2023. The operating rate for bleached packaging papers was 86.0%, up 11.3 points from January 2023. Shipments of the biggest subgrade in unbleached packaging papers – bag & sack – were 92,900 short tons for the month of January, down 1.1% from the same month last year. …AF&PA also released the January 2024 Printing-Writing Monthly report. Total printing-writing paper shipments decreased 9% in January compared to January 2023. U.S. purchases of total printing-writing papers decreased 19% in December 2023 compared to the same month in 2022. Total printing-writing paper inventory levels decreased 1% when compared to December 2023. Compared to the same period last year—Uncoated Free Sheet shipments decreased 3%, Coated Free Sheet shipments decreased 12%, and Mechanical papers shipments decreased 35%.

NAHB’s analysis of Census Data from the Quarterly Starts and Completions by Purpose and Design survey indicates a slowing market for custom home building after a recent gain in market share. There were 44,000 total custom building starts during the fourth quarter of 2023. This marks a more than 2% decline compared to the fourth quarter of 2022, consistent with weakness experienced throughout the home building sector. Over the last four quarters, custom housing starts totaled 178,000 homes, a nearly 13% decline compared to the prior four quarter total (204,000). …As measured on a one-year moving average, the market share of custom home building, in terms of total single-family starts, has fallen back to just under 19%. This is down from a prior cycle peak of 31.5% set during the second quarter of 2009.

The latest Producer Price Index, reported by U.S. Bureau of Labor Statistics, indicated that inputs to residential construction, goods less foods and energy (not seasonally adjusted) increased 1.28% between December 2023 and January 2024. This was the largest monthly change for the index since March of 2022, when it increased by 2.07%. The year-over-year change of the index was 1.91%, the largest yearly increase since February of 2023. …The seasonally adjusted PPI for softwood lumber continued to fall as it decreased for the 6th consecutive month, down 1.82% in January. Over the past year, softwood lumber prices have been down 8.98%. …The not seasonally adjusted PPI for gypsum building materials did not change over the month of January, but was 1.92% lower than last year. …Ready-mix concrete seasonally adjusted prices increased in January 1.37% after falling 1.27% in December. …The not seasonally adjusted PPI for steel mill products continued to rise for the second straight month, up 5.4% in January. 

US new-home construction sank at the start of the year by the most since the onset of the pandemic, indicating the recovery in the housing market will be gradual as many buyers await a further decline in mortgage rates. Residential starts decreased 14.8% last month to a 1.3 million annualized rate, after an upward revision to the prior month, government data showed Friday. Multifamily home construction plummeted by more than 35% after surging in the prior month, while single-family groundbreakings also slowed. The headline figure was the slowest pace in five months. “The monthly housing starts numbers are extremely noisy and prone to revisions, but the bigger picture is that single-family starts are trending higher, lagging the drop in mortgage rates towards the end of last year, while multi-family starts are trending lower, lagging the rollover in rent inflation,” said Kieran Clancy at Pantheon Macroeconomics. Building permits, a proxy for future construction, decreased to a 1.5 million rate.