Lumber continues to make large improvements

May 20, 2020

By: The Working Forest Staff

VANCOUVER, CNW — Residential housing starts in the US slumped -30% from the previous month to a seasonally adjusted annual rate of 891,000, the lowest level since 2015, the Commerce Department said. Data for March was revised up to show homebuilding declining to a pace of 1.276 million units instead of dropping to 1.216 million units as previously reported.

US building permits fell -21% from March to a seasonally adjusted annual rate of 1.07 million, a five-year low. The slump in applications to build was the biggest since July 2008. 

New reports for April show a drop of -30% in US housing starts this year compared to the same month in 2019.

Next month’s report could show a rebound in construction as the housing market begins to stabilize. US homebuilder sentiment rose by more than expected in May, it was reported Monday, following a record drop in April.

In addition, mortgage applications increased in the last weekly survey from the US Mortgage Bankers Association.

The USA purchases approximately 65% of Canada’s lumber production, while Canadian buyers account for about 10%, and those in Japan take 6%.

However: US and Canadian customers purchase mostly standard grades (#2&Btr), while Japan buys almost exclusively premium or “appearance” grades (#1 or J-grade) which sells for quite a bit more than standard grade does.

It’s true that North American softwood lumber purchasing by China has increased massively since 20 years ago, but it is important to note that a lot of this wood does not go into home building or even construction.

A significant proportion of this lumber is used to make crates, pallets, or packaging, or is remanufactured into other uses (railings, other). As such, the huge proportion of Canadian and US wood imported into China is low-grade (#3 / Utility) with the requisite lower price of course.

Continuing to make large improvements from the lows of April, for the week ending May 15, 2020, Western SPF 2×4 price jumped +$6, or +2%, compared to the previous week, said Madison’s Lumber Reporter  May 19. Prices for this benchmark construction framing dimension softwood lumber item gained a whopping +$44, or +14% from one month ago, when it was US$316 mfbm. Compared to mid-May 2019, this price is up +$28, or +8%.

Shrewd investors know that construction framing softwood lumber prices are a good leading indicator for US housing activity, including home building and home sales. Don’t miss out, get lumber price data updates directly to your desktop every Friday morning:

Madison’s Lumber Prices, weekly, are a good forecast indicator of US home builder’s current lumber buying activity ——> DETAILS

SOURCE Madison’s Lumber Reporter

For further information: Keta Kosman, Publisher, Madison’s Lumber Reporter, est. 1952, Vancouver, BC, Canada, www.madisonsreport.com, 604 319-2266

 

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