analysis of current and forecasted demand for housing in ...repair and remodeling’s wood products...
TRANSCRIPT
Analysis of Current and Forecasted
Demand for Housing in
North America
TIMBER MEASUREMENT SOCIETY Central Meeting
April 9, 2015
Coeur d’Alene, Idaho
Delton Alderman Forest Products Marketing Unit
Forest Products Laboratory - Madison, WI Northern Research Station - Princeton, WV
United States Forest Service 304.431.2734
Housing Overview
Factors Influencing Housing Demand
Housing Permits, Starts, and Completions
Existing and New House Sales
Construction Spending
Residential Remodeling
Economic
Demographics
Projections
Threats
Conclusions
Wood Products Consumption
New Construction Wood Products Usage
Source: Howard and McKeever 2014. USFS FPL
26%
74%
All Sawnwood: housing
Other
18%
82%
Non-structural panels: housing
Other
36%
64%
Structural panels: housing
Other
Wood Products Consumption
Repair and Remodeling’s Wood Products Usage
Source: Howard and McKeever 2014. USFS FPL
25%
75%
All Sawnwood: housing Other
16%
84%
Non-structural panels:
housing
Other
26%
74%
Structural panels: housing
Other
Canada: Housing
Source: www.gbm.scotiabank.com/English/bns_econ/retrends.pdf; 4/2/15
Canadian Housing
Source: www.gbm.scotiabank.com/English/bns_econ/retrends.pdf; 4/2/15
Canadian Housing
Source: www.td.com/document/PDF/economics/special/RegionalHousing_Feb2015.pdf; 2/12/15
“…we continue to expect a moderation in the Canadian real estate market over 2015 and 2016.”
Canadian Housing
Canadian Housing Starts
Source: Canada Mortgage and Housing Corporation
54,508
156,276
0
25000
50000
75000
100000
125000
150000
175000
200000
225000
250000
2006 2007 2008 2009 2010 2011 2012 2013 2014 15-Jan 15-Feb
Single-Family Semi-Detached Row Multi-Family Total
Range: 154,000 - 201,000 units in 2015;
148,000 - 203,000 units in 2016
Source: www.cmhc-schl.gc.ca/odpub/pdf/68020.pdf?fr=1392832102155
“Canadian home sales and price trends are relatively stable, though tight supply and strong demand
continue to fuel bigger price increases in a few high-priced markets. Low borrowing costs are
maintaining affordability in the face of high home valuations.”
Canadian Housing
Canada: Housing Starts
Source: www.td.com/document/PDF/economics/special/RegionalHousing_Feb2015.pdf
Canada: Housing Affordability
Source: www.td.com/document/PDF/economics/special/RegionalHousing_Feb2015.pdf
Canada: Housing Starts
Source: Emerging Trends in Real Estate®; Price Waterhouse Coopers and Urban Land Institute ; March 2015
United States Housing
Projecting Housing Demand
Source: US Census
North American Housing
Housing units = Household formations plus housing units lost
2013: 425,000 household formations + 467,368 demolitions = 892,368 units
Actual production: 764.4 – 892.4 = 128,000 under build
2014: 684,750 household formations + 450,500 demolitions = 1,135,250 units
Actual production: 883.8 – 1,135 = 251,200 under build
United States Housing Forecasts: 2015
(000s) Single-Family Starts Multi-Family Starts Total Starts
APA - The Engineered
Wood Association 755 455 1,210
Core Logic 743 381 1,124
Fannie Mae 783 388 1,171
Forest Economic Advisors 753 399 1,152
Goldman Sachs 1,166
Merrill Lynch 1,175
Metrostudy 730 370 1,100
MBA 728 380 1,108
NAHB 804 358 1,162
NAR 783 517 1,300
TD Economics 1,190
Wells Fargo 770 390 1,160
Zillow 1,113
United States Housing
Source: www.richmondfed.org/research/national_economy/national_economic_indicators/pdf/all_charts.pdf; 4/5/15
United States Housing
Source: http://research.stlouisfed.org/fred2/
United States Housing Permits
Source: http://research.stlouisfed.org/fred2
United States Housing
Source: http://research.stlouisfed.org/fred2/
United States Housing
Source: http://research.stlouisfed.org/fred2/
United States Housing Starts
Source: http://research.stlouisfed.org/fred2
United States Housing Starts
Source: http://research.stlouisfed.org/fred2
United States Housing
Source: http://research.stlouisfed.org/fred2/
United States Housing SF starts: Six-month rolling average (unadjusted data)
0
10
20
30
40
50
60
70
80
90
100
Jun 2012 Aug
2012
Oct 2012 Dec
2012
Feb 2013 Apr
2013
Jun 2013 Aug
2013
Oct 2013 Dec
2013
Feb 2014 Apr
2014
Jun 2014 Aug
2014
Oct 2014 Dec
2014
Feb 2015
Total 1 unit 2-4 units 5+ units
Source: US Census - Construction
Housing Starts and Median Income
Source: http://research.stlouisfed.org/fred2; BLS
47000
48000
49000
50000
51000
52000
53000
54000
55000
56000
57000
100
300
500
700
900
1100
1300
1500
1700
1900
Real Median Household Income SF Starts MF Starts
Housing Starts and Median Income
Source: http://research.stlouisfed.org/fred2
50000
51000
52000
53000
54000
55000
100
200
300
400
500
600
700
2009 2010 2011 2012 2013 2014 2015
Real Median Household Income SF Starts MF Starts
United States Housing
Source: US Census & CME Group – random length lumber futures
100
150
200
250
300
350
400
450
500
250
500
750
1,000
1,250
1,500
1,750
2,000
SF Starts CME LBR Futures
6-months forward SF starts: thousands LBR: $ nominal
United States Housing
Source: US Census & CME Group – random length lumber futures
100
150
200
250
300
350
400
450
500
250
500
750
1,000
1,250
1,500
1,750
2,000
SF Starts CME LBR Futures
SF starts: thousands LBR: $ nominal 3-months forward
United States Housing
Source: http://research.stlouisfed.org/fred2/
United States Housing Completions
Source: http://research.stlouisfed.org/fred2
United States Housing
Source: http://research.stlouisfed.org/fred2/
United States Housing
Source: http://research.stlouisfed.org/fred2/
United States Housing
200,000
250,000
300,000
350,000
400,000
450,000
500,000
550,000
600,000
650,000
10,000
60,000
110,000
160,000
210,000
260,000
310,000
360,000
410,000
460,000
Private Residental New Single-family New Multi-family Improvements
Construction Spending
Source: US Census - Construction
United States Housing
340000
345000
350000
355000
360000
365000
370000
35000
55000
75000
95000
115000
135000
155000
175000
195000
215000
Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15
Private Residental New Single-family New Multi-family Improvements
Construction Spending
Imp: -31.9% since 1/2014
Source: US Census - Construction
United States Housing
-50
-40
-30
-20
-10
0
10
20
30
40
50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Jan-15 Feb-15
Total Residential New single family New multi-family Improvements
Percentage change; year 2000 = baseline
Source: US Census - Construction
United States Housing
-6
-4
-2
0
2
4
6
Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15
New Single-family New Multi-family Improvements
Construction Spending: YOY percentage change
Source: US Census - Construction
United States Housing
Source: www.richmondfed.org/research/national_economy/national_economic_indicators/pdf/all_charts.pdf; 4/5/15
United States Housing
Source: US Census - Construction
United States Housing
Source: US Census - Construction
SAAR → 458 thou
SAAR → 539 thou
United States Housing
Source: http://research.stlouisfed.org/fred2/
United States Housing
Source: http://research.stlouisfed.org/fred2
United States New House Sales
Source: http://research.stlouisfed.org/fred2
United States Housing
51000
51500
52000
52500
53000
53500
54000
54500
300
350
400
450
500
550
2009 2010 2011 2012 2013 2014 2015
Real Median Household Income New Sales
Source: US Census – Construction & BLS
United States Housing
Source: http://research.stlouisfed.org/fred2/
300
500
700
900
1,100
1,300
1,500
$10,000
$60,000
$110,000
$160,000
$210,000
$260,000
$310,000
New SF sold (SAAR) Median Price
Bubble
New SF Sales vs. Median Price
United States Housing
Source: http://research.stlouisfed.org/fred2/
300
500
700
900
1,100
1,300
1,500
$10,000
$60,000
$110,000
$160,000
$210,000
$260,000
$310,000
$360,000
New SF sold (SAAR) Average Price
Bubble
New SF Sales vs. Mean Price
United States Housing
Source: http://research.stlouisfed.org/fred2/
United States Housing
Source: US Census & CME Group – random length lumber futures
100
150
200
250
300
350
400
450
500
20
40
60
80
100
120
140
New SF sales CME LBR Futures
New SF sales (unadjusted): thousands LBR: $ nominal 6-months forward
United States Housing
Source: US Census & CME Group – random length lumber futures
100
150
200
250
300
350
400
450
500
20
40
60
80
100
120
140
New SF sales CME LBR Futures
New SF sales (unadjusted): thousands LBR: $ nominal 3-months forward
United States Housing
Source: http://research.stlouisfed.org/fred2/
United States Housing
Source: http://research.stlouisfed.org/fred2/
United States Housing
Source: http://research.stlouisfed.org/fred2
United States Housing
51000
51500
52000
52500
53000
53500
54000
54500
200000
210000
220000
230000
240000
250000
260000
2009 2010 2011 2012 2013 2014 2015
Real Median Household Income Existing Sales Price (mean)
Source: US Census – Construction & BLS
United States Housing
0
5
10
15
20
25
30
35
40
45
< $125-199 % $200-249 % $250-299 % $300-399 % 400-499 % 500-750 % > 750 %
Source: http://research.stlouisfed.org/fred2/
United States Housing
Source: http://research.stlouisfed.org/fred2/
16
22
10
11
7
< $125-199 %
$200-249 %
$250-299 %
$300-399 %
$400-499 %
$500-750 %
> $750 %
66% of all sales > $250,000
34% of all sales < $250,000
United States Housing
Source: www.housingwire.com/articles/33448-realtytrac-home-price-appreciation-revealed-in-3-charts and
www.realtytrac.com/news/home-prices-and-sales/feb-2015-home-price-appreciation-analysis; 4/2/15
United States Housing
Source: http://research.stlouisfed.org/fred2; www.realtor.org/news-releases/2015/04/vacation-home-sales-soar-to-record-high-in-2014-investment-purchases-fall; 4/1/15
“…vacation-home sales catapulted to an estimated 1.13 million last year, the highest
amount since NAR began the survey in 2003 (22.8%).” Increased 57.4% from 2013.
4,940,000 -- 2014
United States Housing
Source: www.valuewalk.com/2015/03/the-change-in-american-middle-class-from-2000-to-2013-interactive-infographic; 3/31/15
United States Housing
Source: www.realtytrac.com/news/home-prices-and-sales/home-price-growth-versus-wage-growth-during-housing-recovery; 3/25/15
Price appreciation outpaces wage growth in 76%
of U.S. markets during housing recovery
Household Formation & Renters
Source: https://confoundedinterest.files.wordpress.com/2015/03/rentalrecd.png; 3/28/15
Source: http://research.stlouisfed.org/fred2
United States Housing
United States Housing Demographics
Source: US Census
Housing Starts & Demographics
Structural change in the housing market include:
- a dramatic correction in median wealth of U.S. households as home values declined
- declining home ownership rates.
Source: www.kansascityfed.org/publicat/econrev/pdf/13q4Rappaport.pdf
Source: http://research.stlouisfed.org/fred2/series/M1
United States Housing
Source: http://research.stlouisfed.org/fred2/series/M2V
United States Housing
Source: McKinsey & Company, McKinsey Global Institute, Debt and (not much) deleveraging; February 2015
Potential Housing Threats
Source: McKinsey & Company, McKinsey Global Institute, Debt and (not much) deleveraging; February 2015
Potential Housing Threats
“High debt levels, whether in the
public or private sector, have
historically placed a drag on growth
and raised the risk of financial crises
that spark deep economic recessions.
Growth in global debt has shifted
since 2007, with developing
economies accounting for half of
new debt.”
Source: McKinsey & Company, McKinsey Global Institute, Debt and (not much) deleveraging; February 2015
“…three particular areas of potential
concern in China: the concentration
of debt in real estate, the rapid
growth and complexity of shadow
banking, and the off-balance sheet
borrowing by local governments.
Nearly half of China’s debt is related
to real estate.”
Potential Housing Threats
Threats to Housing
World Debt or “Leverage”
Nothing really has changed – interest rates are lower; yet
debt keeps increasing
What’s going to happen in China?
Does the U.S. economy stall or decrease?
Minimal increase in real medium income
Increased closing costs due to new lending regulations
What if there is “no” Eurozone recovery?
Geopolitical events?
Conclusions
Canada – how will the commodity demand/price decline affect housing
Most forecasts call for slightly decreasing starts through 2016
For the Canadian and U.S. housing markets to improve – both economies need to
advance in conjunction with increases in real median incomes
United States
higher priced houses appear to be the strongest sector
multifamily housing as well
The opportunity: houses in the $100 to $200 thousand price range
The BIG question? → Will the U.S. housing market continue to improve?
Questions?
Thank you
Delton Alderman Forest Products Marketing Unit
Forest Products Laboratory - Madison, WI
Northern Research Station - Princeton, WV
USDA Forest Service
304.431.2734