US Housing Starts & Softwood Lumber Prices: December 2020 and January 2021
Total residential starts in the US for December 2020 climbed by +5.8% to a 1.67 million annualized rate. Permits for future homebuilding accelerated +4.5% to a rate of 1.709 million units, in December, and totalled 1.452 million for full-year 2020, as reported by Madison's. This is a +4.8% increase from 2019.
December starts of single-family housing, the largest share of the market and construction which uses the most wood, climbed +12% to a 1.34 million pace. It was the eighth straight monthly increase, the longest such stretch in 50 years. Single-family building permits raced up +7.8% to a rate of 1.226 million units in December.
Homebuilding is being supported by lean inventories, especially for previously owned homes.
As January 2021 marched on, lumber prices corrected downward somewhat from the unseasonal increase for the first week of the year. In the week ending January 22, 2021, the price of benchmark softwood lumber commodity item Western S-P-F KD 2x4 #2&Btr dropped by -$50, or -5.6%, to US$894 mfbm, from $944 the previous week. Last week's
price is +$20, or +2.3%, more than it was one month ago when it was $874.
After popping up by a sizeable degree in the first full work week of 2021, last week's benchmark softwood lumber and panel prices corrected downward to more sustainable levels as demand continued strong but supply was able to serve a burst of orders. This year, sawmills across Canada and the US are well poised to produce ample lumber volumes for white-hot construction activity across the continent.
Indeed, Canadian and US housing starts and home sales data for full-year 2020 showed extremely robust real estate markets, which are not going to slow down through this year, and possibly through 2022. One important metric to note is that the largest demographic entering the first-time home buyer cohort is Millennials. This suggests sustained, longer-term high demand for home sales. Strong home sales inevitably leads to high rates of home construction, which of course means building materials — specifically lumber — will continue to sell well for quite some time to come.
Source: Madison's Lumber Reporter
16 WESTERN PALLET