Category Archives: Finance & Economics

NAHB’s analysis of Census Data… indicates custom home building gained market share during 2022. There were 44,000 total custom building starts during the fourth quarter of the year. This marks a 10% decline compared to the fourth quarter of 2021 as the overall home building market softened. Nonetheless, over the course of 2022, custom housing starts totaled 203,000 homes, a 4% gain compared to the 2021 total (195,000). After market share declines due to a rise in spec building in the wake of the pandemic, the market share for custom homes has increased. As measured on a one-year moving average, the market share of custom home building, in terms of total single-family starts, has increased to 21%. This is down from a recent high of 31.5% set during the second quarter of 2009.

An expected impact of the pandemic was a need for more residential space, as people use homes for more purposes including work. During the housing boom after covid, this led to a rise for new single-family home size. However, as the housing market weakens on lower affordability conditions, this trend has reversed. According to… NAHB analysis, median single-family square floor area declined significantly to 2,203 square feet (the lower level since 2011). Average (mean) square footage for new single-family homes fell to 2,472. Since Great Recession lows (and on a one-year moving average basis), the average size of new single-family homes is now 4.7% higher, while the median size is 8.2% higher. However both measures will weaken in the coming months.

According to NAHB analysis, during the fourth quarter of 2022, single-family attached starts totaled 37,000, which is 8% lower than the fourth quarter of 2021. Over the course of 2022, townhouse construction starts totaled 148,000 units, which is effectively unchanged from 2021. Using a one-year moving average, the market share of newly-built townhouses increased to 15% of all single-family starts for the fourth quarter. As denser areas reopened following covid later, the townhouse market rebounded later. Additionally, as the spec single-family building market slowed in recent quarters on higher interest rates, the townhouse construction market share has increased. In fact, the current 15% market share is the highest since 1985.

WASHINGTON – The American Forest & Paper Association (AF&PA) released its January 2023 Printing-Writing Monthly report. According to the report, total printing-writing paper shipments decreased 9% in January compared to January 2022. U.S. purchases of total printing-writing papers increased 3% in January compared to the same month last year. Total printing-writing paper inventory levels increased 2% when compared to December 2022. January shipments decreased in 3 of the 4 major P-W grades when compared to the same month the year before, with uncoated mechanical papers recording the sole year-ago increase. In 2022 year to date net imports increased in all 4 major grades, with coated and uncoated free sheet showing the greatest percent increase and coated mechanical increasing the least. [END]

As expected, the Census Department’s New Residential Construction report for January was another disappointment. Privately‐owned housing units authorized by building permits in January were at a seasonally adjusted annual rate of 1,339,000. This is 0.1 percent above the revised December rate of 1,337,000, but is 27.3 percent below the January 2022 rate of 1,841,000. Single‐family authorizations in January were at a rate of 718,000; this is 1.8 percent below the revised December figure of 731,000. Authorizations of units in buildings with five units or more were at a rate of 563,000 in January. …Privately‐owned housing starts in January were at a seasonally adjusted annual rate of 1,309,000. …Privately‐owned housing completions in January were at a seasonally adjusted annual rate of 1,406,000. 

Two consecutive solid monthly gains for builder confidence, spurred in part by easing mortgage rates, signal that the housing market may be turning a corner even as builders continue to contend with high construction costs and building material supply chain logjams. Builder confidence in the market for newly built single-family homes in February rose seven points to 42, according to the NAHB/Wells Fargo Housing Market Index (HMI). This is the strongest reading since September of last year. …The HMI indicates that incremental gains for housing affordability have the ability to price-in buyers to the market. …All three HMI indices posted gains for the second consecutive month. The HMI index gauging current sales conditions in February rose six points to 46, the component charting sales expectations in the next six months increased 11 points to 48 and the gauge measuring traffic of prospective buyers increased six points to 29.

WASHINGTON – U.S. single-family homebuilding fell in January, but an easing in mortgage rates and improvement in homebuilder confidence suggested the recession-hit housing market was close to finding a floor. Single-family housing starts, which account for the bulk of homebuilding, dropped 4.3% to a seasonally adjusted annual rate of 841,000 units last month. Single-family homebuilding tumbled 27.3% on a year-on-year basis in January. …The sector has been the biggest causality of the Federal Reserve’s aggressive interest rate hiking campaign. …Starts for housing projects with five units or more fell 5.4% to a rate of 457,000 units. Multi-family housing construction remains underpinned by demand for rental accommodation. With both single- and multi-family homebuilding declining, overall housing starts dropped 4.5% to a rate of 1.309 million units last month, the lowest level since June 2020.

Consumer prices in January saw the smallest year-over-year gain since October 2021 with a seventh consecutive month of a deceleration. However, this disinflation pace was much slower than expected, partially because new methodology introduces higher weights for shelter and lower weights for food and energy to reflect changes in consumer spending in 2021. The shelter index (housing inflation) continued to rise at an accelerated pace and was the largest contributor to the total increase. …While inflation appears to have peaked and continues to slow, inflation in core service (excluding shelter) has not begun to ease. …The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose by 0.5% in January on a seasonally adjusted basis, following an increase of 0.1% in December. …The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.7% in January, following an increase of 0.8% in December.

According to the Kitchen Cabinet Manufacturers Association’s (KCMA) monthly Trend of Business Survey, participating cabinet manufacturers reported an increase in overall cabinet sales of 9.7% for December 2022 compared to the same month in 2021. December 2022 sales increases over December 2021: Overall sales up 9.7%, Custom sales up 24.8%​​​​​​, and Semi-custom up 19.3%. …YTD 2022 to 2021: Overall sales up 16.4%, Custom sales up 17.8%​​​​​​, and Semi-custom up 17.4%. …KCMA is the major trade association for kitchen cabinet and bath vanity manufacturers and key suppliers of goods and services to the industry.

Mirroring a steep rise in mortgage rates coupled with ongoing building material supply chain bottlenecks that increased construction costs, housing affordability posted three consecutive quarterly declines in 2022 and now stands at its lowest level since the NAHB began tracking it on a consistent basis in 2012. According to the NAHB/Wells Fargo Housing Opportunity Index, just 38.1% of new and existing homes sold between the beginning of October and end of December were affordable to families earning the U.S. median income of $90,000. The index trails the previous mark of 42.2% in the third quarter and 42.8% set in the second quarter. However, a recent drop in mortgage rates over the past two months signals that declining affordability conditions may have reached their low point for this cycle.

December housing starts saw a dip of over 20% from the same time last year. With interest rates rising and murmurs of a recession abound, the market continues on an unclear path in 2023. According to Forest2Market data, housing starts at the end of 2022 were about 22% lower year-over-year (y-o-y) from 2021. The biggest drop occurred in 1 unit starts with a 25% dip YoY. Starts for 5+ units were also down 16%, while 2-4 units saw an increase from last year. …The major question across the industry right now relates to market performance. Will we see a recovery in 2023 compared to last year? …Many investors in the homebuilding sector are waiting for better economic conditions to make a move. This means a delay of several months to a year or more before jumping back in. Delays like this will inevitably lead to depressed demand for building materials.

As the price of lumber raced up to over $1,500 per thousand board feet in the spring of 2021, economists acknowledged that the supply side of the economy simply couldn’t sustain the housing demand rush unleashed by the pandemic. Of course, we’d later learn that… lumber was actually the canary in the coal mine for inflation at large. That predictive power is why economists and analysts alike are once again paying close attention to lumber. …Fortune reached out to Dustin Jalbert, at Fastmarkets. Here are his  predictions:

1. U.S. Single-family homes will fall 16% in 2023 and multifamily 7%
2. U.S. lumber consumption will fall between 4% and 5% in 2023 (or 2.2 billion bf)
3. Record volatility in lumber prices since 2020 is over
4. British Columbia sawmill closures to wipe out production capacity of 1.5 billion bf
5. Inflation— and mortgage rates—will fall in the second half of this year, edging closer to the Fed’s 2% target

While housing starts may be down, manufacturers see the potential for significant wins. “I expect the repair and remodel sector to grow in the coming year, even in the case of a potential dip at the beginning of the year,” says Cameron Bailey for LP. …Other experts agree. …Steve Booz for Westlake Royal Building Products said…  “while there may be less demand for home buying or home building, we expect remodeling activity to continue into the next year, albeit at a slower rate.” …While manufacturers seem to share a cautious optimism when it comes to growth, some suggest that alternative materials may lead in sales. PVC, polymer, aluminum, and other non-wood options are growing in demand. …While it can be easy for LBM dealers to feel concerned… there’s many signs that 2023 has the potential to be a strong one when it comes to trim and moulding sales.

U.S. wood pellet exports reached 917,175.4 metric tons in December, according to data released by the USDA Foreign Agricultural Service. The 917,175.4 metric tons of wood pellets exported in December was up from both 694,199.7 metric tons in November and 798,883.6 metric tons in December 2021. The U.S. exported wood pellets to more than a dozen countries in December. The U.K. was the top destination at 360,711.6 metric tons, followed by Japan at 220,953.7 metric tons and the Netherlands at 212,799.6 metric tons. The value of U.S. wood pellet exports reached $152.95 million in December, up from both $120.94 million the previous month and $101.07 million in December 2021. …Total U.S. wood pellet exports for 2022 reached 8.98 million metric tons at a value of $1.54 billion, compared to 7.45 million metric tons exported in 2021 at a value of $1.05 billion. 

The median age of owner-occupied homes is 40 years, according to the latest data. The U.S. owner-occupied housing stock is aging rapidly… as the residential construction continues to fall behind in the number of new homes built. With a lack of sufficient supply of new construction, the aging housing stock signals a growing remodeling market, as old structures need to add new amenities or repair/replace old components. Rising home prices also encourage homeowners to spend more on home improvement. Over the long run, the aging of the housing stock implies that remodeling may grow faster than new construction. A little less than half of the owner-occupied homes was built before 1980, with around 35% built before 1970. New construction added nearly 8.3 million units to the national stock from 2010 to 2021, accounting for only 10% of owner-occupied housing stock in 2021.

In related NAHB news: Age of US Housing Stock by State

After declines for five consecutive months, total nonfarm payroll employment increased by 517,000 in the first month of 2023 and the unemployment rate hit a 53-year low at 3.4% as more people entered the labor market. Construction industry employment (both residential and non-residential) totaled 7.9 million and exceeds its February 2020 level. Residential construction gained 5,500 jobs, while non-residential construction employment gained 19,300 jobs in January. Residential construction employment exceeds its level in February 2020, while 96% of non-residential construction jobs lost in March and April 2020 have now been recovered. …Residential construction employment now stands at 3.3 million in January, broken down as 934,000 builders and 2.3 million residential specialty trade contractors. In January, the unemployment rate for construction workers ticked up by 0.1 percentage point to 4.4% on a seasonally adjusted basis.