Category Archives: Finance & Economics

While labor availability has improved in the past year, shortages in skilled labor continue to impact both project costs and timelines, according to the Q2 2023 U.S. Houzz Renovation Barometer. Approximately 79% of businesses surveyed by Houzz reported “moderate to severe” labor shortages in the second quarter of 2023, an improvement from 91% of respondents during hte same period last year. Houzz says the decrease in businesses reporting labor shortages may reflect an overall decline in business activity levels. New committed projects reported at the start of the year have decreased by five index points relative to the third quarter of 2022, according to Houzz. 42% of industry professionals reported moderate to severe shortages of carpenters, an improvement from 56% in 2022. Over a quarter of respondents reported shortages of electricians, plumbers, cabinetmakers, and framers, though all represented an improvement from labor conditions in the second quarter of 2022.

Consumer prices in April saw the smallest year-over-year gain since April 2021. This marked the tenth consecutive month of deceleration and the first time the rate has fallen below 5% in two years. While the shelter index (housing inflation) experienced its smallest monthly gain since January 2022, it continued to be the largest contributor to the total increase, accounting for over 60% of the increase in all items less food and energy. The Fed’s ability to address rising housing costs is limited as shelter cost increases are driven by a lack of affordable supply and increasing development costs. Additional housing supply is the primary solution to tame housing inflation. The Fed’s tools for promoting housing supply are at best limited. In fact, further tightening of monetary policy will hurt housing supply by increasing the cost of AD&C financing. 

The NAHB’s Remodeling Market Index survey has asked questions about Aging-in-Place (AIP) periodically, beginning in 2004. According to results from the Q1 2023 survey, 63 percent of professional remodelers undertake projects designed to allow homeowners to Age-in-Place, down from 77 percent in Q4 2018. …Ninety-eight percent of remodelers cited that most or some of their consumers are familiar with the Aging-in-Place concept. …Grab bars are the most common AIP project, with 93 percent of remodelers reporting this job in the last year. They are followed by curb-less shower at 83 percent, installing higher toilets at 77 percent, widening doorways at 63 percent, and adding lighting/task lighting at 49 percent. Seventy-six percent of remodelers indicated that requests for Aging-in-Place features have significantly or somewhat increased over the past 5 years.

The “Construction Supply 150 (CS150) study by Webb Analytics attributes last year’s comparatively low growth rates at Home Depot, Lowe’s and other DIY groups in the USA to lower lumber prices. “Prices paid at the mill for major lumber species dropped 62 to 73 per cent between January and December last year,” noted Craig Webb, president of Webb Analytics and the author of CS150. “Much of the CS150 was affected – even giants like Home Depot, which posted only a 4.3 per cent rise, in part because lumber sales rose 0.8 per cent in 2022 compared with 18 per cent a year before.” The 4.3 per cent growth rate in 2022 refers to Home Depot’s operations in the US, excluding Canada and Mexico. Lowe’s’ growth in the US is 1.8 per cent, according to the report. [END]

The U.S. exported 909,787 metric tons of wood pellets in March, up from both 632,044 metric tons exported in the previous month and 801,396 metric tons exported in March 2022, according to data released by the USDA Foreign Agricultural Service on May 4. …The U.K. was the top destination for U.S. wood pellet exports at 366,798 metric tons, followed by the Netherlands at 256,478 metric tons and Japan at 102,742 metric tons. The value of U.S. wood pellet exports reached $169.43 million in March, up from $117.99 million in February and $127.33 million in March of last year. Total U.S. wood pellet exports for the first quarter of 2023 reached 2.18 million metric tons a value of $402.08 million, compared to 2.09 million metric tons exported during the same period of last year at value of $312.69 million.

The Federal Reserve’s monetary policy committee raised the federal funds target rate by 25 basis points at the conclusion of its May meeting. Although the communication from the Fed did not explicitly indicate that they are done tightening, language used in their statement signals the Fed is moving toward a more data-dependent posture, albeit one that retains a hawkish bias. …Today’s increase of the fed funds rate moved that target to an upper rate of 5.25%, the fastest increase for rates in decades. …While not explicit, the Fed’s language represents a pivot to a more data-dependent stance. Previously, the Fed had asserted that additional rate hikes would be required, it was only a matter of how large. …Nonetheless, the Fed left room to continue rate hikes, if needed. …Caution would suggest the Fed pause and evaluate conditions in the coming months. 

MARIETTA, Georgia — BlueLinx Holdings, a U.S. wholesale distributor of building products, reported financial results for the three months ended April 1, 2023. …Net sales were $798 million, a decrease of $504 million, or 39% when compared to the first quarter of 2022. Gross profit was $134 million, a decrease of $158 million, or 54%, year-over-year, and gross margin was 16.7%, down 560 basis points from the same period last year. …Adjusted EBITDA was $47 million, or 5.9% of net sales, for the first quarter of 2023, as compared to $202 million, or 15.5% of net sales in the first quarter of 2022, which was an all-time high for Company quarterly Adjusted EBITDA. …Shyam Reddy, CEO said,  “Despite a decline in demand for building products across our industry, we worked hard to maintain both our price and cost discipline.”

Home builders are enjoying stronger-than-expected business this spring, capitalizing on the recent fall in mortgage rates and the shortage of existing homes for sale. Last year’s rapid rise in mortgage rates made home purchasing far more expensive for most buyers, slowing home sales and pressuring the home-building industry. Home builders pulled back on land acquisition and new construction. Now, new single-family home sales are bouncing back with supply tight in the existing-home market. Active listings in March stood at roughly half of where they were four years earlier, according to Realtor.com, in part because higher mortgage rates made many homeowners reluctant to sell and give up their current low rates. That low inventory has put home builders in a good spot. Newly built homes made up about one-third of single-family homes for sale in March… up from a historical norm of 10% to 20%. [to access the full story a WSJ subscription is required]

After more than a decade of continuous growth, annual spending on improvements and repairs to owner-occupied homes is expected to decline by early next year, according to LIRA… at the Joint Center for Housing Studies of Harvard University. The LIRA projects that year-over-year expenditures for homeowner improvements and maintenance will post a modest decline of 2.8 percent through the first quarter of 2024. “Higher interest rates and sharp downturns in homebuilding and existing home sales are driving our projections for sluggish remodeling activity next year,” says Carlos Martín. “With ongoing uncertainty in financial markets and the threat of a recession, homeowners are increasingly likely to pare back or delay projects beyond necessary replacements and repairs.” …“Homeowner improvement and maintenance spending is expected to top out at $458 billion in the coming year, compared with market spending of $471 billion over the past four quarters,” says Abbe Will.

Lower mortgage rates and limited existing inventory helped to push new home sales up in March, even as builders continue to grapple with increased construction costs and material supply disruptions. …Sales of newly built, single-family homes in March were estimated at a 683,000 seasonally adjusted annual pace, which is a 9.6% increase over a downwardly revised reading of 623,000 in February. …New single-family home inventory fell 9.5% in March, however, it remained elevated at a 7.6 months’ supply at the current building pace. A measure near a 6 months’ supply is considered balanced. Total new home inventory peaked in October at 466,000 and has been declining since that time, with a total inventory of 432,000 available for sale in March.

The Conference Board Consumer Confidence Index® fell in April to 101.3, down from 104.0 in March. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—increased to 151.1 from 148.9 last month. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—fell to 68.1 from 74.0. The Expectations Index has now remained below 80—the level associated with a recession within the next year—every month since February 2022, with the exception of a brief uptick in December 2022. The survey was fielded from April 3—about three weeks after the bank failures in the United States—to April 19. …“While consumers’ relatively favorable assessment of the current business environment improved somewhat in April, their expectations fell and remain below the level which often signals a recession looming,” said Ataman Ozyildirim.