Analysis of Current and Forecasted Demand for Housing in ... · United States Housing Forecasts:...

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

dalderman@fs.fed.us

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

All Sawnwood: housing

Non-structural panels: housing

Structural panels: housing

Wood Products Consumption

Repair and Remodeling’s Wood Products Usage

Source: Howard and McKeever 2014. USFS FPL

All Sawnwood: housing Other

Non-structural panels:

housing

Structural panels: housing

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

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

Source: www.richmondfed.org/research/national_economy/national_economic_indicators/pdf/all_charts.pdf; 4/5/15

Source: http://research.stlouisfed.org/fred2/

United States Housing Permits

Source: http://research.stlouisfed.org/fred2

United States Housing Starts

United States Housing SF starts: Six-month rolling average (unadjusted data)

Jun 2012 Aug

Oct 2012 Dec

Feb 2013 Apr

Jun 2013 Aug

Oct 2013 Dec

Feb 2014 Apr

Jun 2014 Aug

Oct 2014 Dec

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

Real Median Household Income SF Starts MF Starts

Housing Starts and Median Income

2009 2010 2011 2012 2013 2014 2015

Real Median Household Income SF Starts MF Starts

Source: US Census & CME Group – random length lumber futures

SF Starts CME LBR Futures

6-months forward SF starts: thousands LBR: $ nominal

SF Starts CME LBR Futures

SF starts: thousands LBR: $ nominal 3-months forward

United States Housing Completions

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

340000

345000

350000

355000

360000

365000

370000

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

Imp: -31.9% since 1/2014

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

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: www.richmondfed.org/research/national_economy/national_economic_indicators/pdf/all_charts.pdf; 4/5/15

SAAR → 458 thou

SAAR → 539 thou

United States New House Sales

2009 2010 2011 2012 2013 2014 2015

Real Median Household Income New Sales

Source: US Census – Construction & BLS

$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

$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

New SF sales CME LBR Futures

New SF sales (unadjusted): thousands LBR: $ nominal 6-months forward

New SF sales CME LBR Futures

New SF sales (unadjusted): thousands LBR: $ nominal 3-months forward

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

< $125-199 % $200-249 % $250-299 % $300-399 % 400-499 % 500-750 % > 750 %

< $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

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

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

Source: www.valuewalk.com/2015/03/the-change-in-american-middle-class-from-2000-to-2013-interactive-infographic; 3/31/15

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

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

Source: http://research.stlouisfed.org/fred2/series/M2V

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.”

“…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.”

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

dalderman@fs.fed.us

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