Category Archives: Finance & Economics

Inflation picked up again in October, showing the last mile to the 2% target will be the hardest. Shelter costs remained the main driver of inflation, accounting for over 65% of the 12-month increase in the all items less food and energy index. However, the year-over-year change in the shelter index has been below 5% for the second consecutive month, signaling some moderation in housing inflation. While the Fed’s interest rate cuts could help ease some pressure on the housing market, its ability to address rising housing costs is limited, as these increases are driven by a lack of affordable supply and increasing development costs. In fact, tight monetary policy hurts housing supply because it increases the cost of AD&C financing. Shelter costs continue to rise at an elevated pace despite Fed policy tightening. Additional housing supply is the primary solution to tame housing inflation.

Framing lumber prices continued to climb, and traders tried to assess a number of factors that might affect the market moving forward. The US presidential election injected a dose of optimism among some traders. They also weighed the Federal Reserve’s decision to cut the benchmark interest rate 25 basis points, while Freddie Mac noted mortgage rates were still rising. The Random Lengths Framing Lumber Composite Price gained for the sixth straight week, climbing $11 to $441. That is its highest level since August 2023. A fading Southern Pine market was once again an exception to an otherwise upward trend in most framing lumber species. While supply-driven strength persisted in Canada and the western US, downward price momentum mounted in the South. …Western S-P-F prices continued to climb by double-digit increments in most cases. Buyers with immediate needs padded thin inventories with available supplies.

The production index for sawmills and wood preservation industries rose marginally by 0.2% in the second quarter of 2024. After falling for the previous two quarters, this was the first rise in real output since the third quarter of 2023. The index was 2.2% lower than one year ago, the largest year-over-year decline since falling 4.7% in the fourth quarter of 2021. …The Census Bureau’s Quarterly Survey of Plant Capacity Utilization is another source of interest. …The sawmill and wood preservation industry full utilization rates jumped significantly over the quarter, up from 61.9% to 70.7%. Given this rise, it is surprising that production did not also increase significantly. Average plant hours per week in operation did rise for these firms, up from 47.9 hours in the first quarter to 57.7 hours in the second quarter. …Employment at sawmill and wood preservation firms rose for the first time in six quarters, up to approximately 89,400 employees in the second quarter.

The Fed cut the short-term federal funds rate by an additional 25 basis points at the conclusion of its November meeting, reducing the top target rate to 4.75%. However, while the Fed noted it is making progress to its 2% inflation target, it did not provide post-election guidance on the pace and ultimate path for future interest rate cuts. …The policy risks for the central bank had recently been between inflation (decreasing risks) and concerns regarding the health of the labor market (risks rising). However, the 2024 election result changes this outlook somewhat. In particular, the election increases the probability of additional economic growth, a tighter labor market, larger government deficits, and higher tariffs. All of these factors can be inflationary, even if they yield other macroeconomic benefits. …Consequently, the Fed will need to recalibrate its economic and policy outlook.

The Market Composite Index, a measure of mortgage loan application volume by the Mortgage Bankers Association’s weekly survey, decreased 13.9% month-over-month on a seasonally adjusted (SA) basis due to higher mortgage rates. This decline was reflected in both the Purchase and Refinance Indices, which fell by 4.4% and 23%, respectively. However, compared to October 2023, the Market Composite Index is up by 39%, with the Purchase Index seeing a slight 1.9% increase and the Refinance Index higher by 149.9%. The average 30-year fixed mortgage rate reversed its downward trajectory with an increase of 36 basis points (bps), following volatility in the ten-year Treasury yield. This brought the rate back to around the same level as it was in August at 6.53%. However, compared to its peak last October, the current rate is 125 bps lower.

Confidence in the market for new multifamily housing showed mixed results year-over-year in the third quarter of 2024, according to results from the Multifamily Market Survey by the NAHB.  The Multifamily Production Index (MPI) had a reading of 40, an increase of two points year-over-year, while the Multifamily Occupancy Index (MOI) had a reading of 75, down seven points year-over-year. While demand for rental apartments remains strong enough to support relatively high occupancy rates in existing projects, multifamily builders and developers continue to face many significant obstacles on new projects such as higher construction costs, the cost and access to financing, and the availability of land and regulations.  NAHB forecasts multifamily construction to remain weak for another year before beginning to move back to long-term trends toward the end of 2025.

Sales picked up in many framing lumber species, especially in the West. A lack of supplies in Canadian S-P-F led to buyers switching to other species. As a result, in the middle of the week markets like the Inland and Coast saw more demand and price gains than have been evident for several weeks. The Random Lengths Framing Lumber Composite Price notched its fifth consecutive weekly gain and hit $430, its high so far this year. …Gains in the cash market were supported by strong upward movement in lumber futures through Wednesday. The November and January contracts traded in the green much of the week, with double-digit gains posted across all contracts on Wednesday. Despite an overall rising market, Southern Pine was a laggard. Supply-driven strength that fueled the recent run in the South faded or stalled as mill order files dwindled and prompt loads surfaced more frequently.

The U.S. economy grew at a solid pace in the third quarter of 2023, boosted by strong consumer spending and government spending. According to the “advance” estimate released by the Bureau of Economic Analysis (BEA), real gross domestic product (GDP) expanded at an annual rate of 2.8% in the third quarter of 2024, following a 3.0% gain in the second quarter of 2024. This quarter’s growth matched NAHB’s forecast. Furthermore, the data from the GDP report suggests that inflation is cooling. The GDP price index rose 1.8% for the third quarter, down from a 2.5% increase in the second quarter of 2024. The Personal Consumption Expenditures Price (PCE) Index, which measures inflation (or deflation) across various consumer expenses and reflects changes in consumer behavior, rose 1.5% in the third quarter. This is down from a 2.5% increase in the second quarter of 2024.

The homeownership rate for those under the age of 35 dropped to 37% in the third quarter of 2024, reaching the lowest level since the first quarter of 2020, according to the Census’s Housing Vacancy Survey (HVS). Amidst elevated mortgage interest rates and tight housing supply, housing affordability is at a multidecade low. The youngest age group, who are particularly sensitive to mortgage rates, home prices, and the inventory of entry-level homes, saw the largest decline among all age categories. The U.S. homeownership rate held steady at 65.6% in the third quarter of 2024, showing a flat trend over the last three quarters. However, this marks the lowest rate in the last two years. The homeownership rate remains below the 25-year average rate of 66.4%.

GRAND RAPIDS, Michigan – UFP Industries announced third quarter 2024 results including net sales of $1.65 billion, and net earnings attributable to controlling interest of $100 million. Net sales decreased 10 percent due to a 3 percent decrease in organic unit sales and a 7 percent decrease in selling prices. The price of Southern Yellow Pine (SYP), which comprises approximately two-thirds of our lumber purchases, decreased 21 percent and contributed to the decrease in our selling prices. …”Our third quarter results were impacted by softer demand and broad-based pricing pressure which reduced our revenue and profit margins. …While we expect conditions to remain challenging as we move into 2025, we are well positioned to capitalize on opportunities,” said Chairman and CEO Matthew J. Missad.

The US economy seems to have pulled off a remarkable and historic achievement. Gross domestic product expanded at an annualized rate of 2.8% in the third quarter, the Commerce Department said Wednesday. That’s a slightly weaker pace than the second quarter’s 3% rate and above the 2.6% rate economists projected.  As the US economy continued to expand from July through September, inflation drifted lower toward the Federal Reserve’s 2% target during that same period, the report showed. Several economists tell CNN that the economy has finally pulled off an exceptionally rare achievement known as a soft landing, a scenario in which inflation is tamed without a recession. …Meanwhile, businesses continued to invest during the July-through-September period, though at a slightly softer pace than earlier in the year. Government spending at both the federal and state level also contributed to third-quarter economic growth.

Stimulus measures announced last month by the Chinese government designed to energize the country’s lethargic economy could provide a boost to an ailing real estate sector, many observers have noted. A struggling real estate sector has undermined China’s demand for new construction this year, and as a result, slowed softwood lumber consumption. The trend has created a headwind to Chinese demand for imported lumber. In late September, the People’s Bank of China announced a cut in the existing mortgage rate by an average of 50 basis points. The rate cut was designed to stimulate consumer spending. …China’s softwood lumber imports declined to 11.7 million cubic meters through August, down 6% from the year-ago pace, according to Trade Data Monitor. Canadian exports to China slipped 3% during that time frame compared to a 2% decline in shipments from Russia and a 16% drop in deliveries from European suppliers.

Home buyers moved off the sidelines in September following the Federal Reserve’s recent move to cut interest rates for the first time in four years. Sales of newly built, single-family homes in September increased 4.1% to a 738,000 seasonally adjusted annual rate from a downwardly revised August number, 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 September is up 6.3% compared to a year earlier. Despite challenging affordability conditions, home builder confidence edged higher in October as they anticipate that mortgage rates will gradually, in an uneven manner, moderate in the coming months. There is a significant need for additional housing supply, as many prospective home buyers are entering the market.