Questions like, Where are you predicting the market’s going to go? or What do you think the market will do next quarter? continue to be top of mind, conversation starters. While uncertainty still seems to be the current theme, we’re seeing an uptick in construction activity, paving the way for a *hopefully* stronger Q3.
May Lumber Prices
Over the last few days, we’ve watched lumber market prices slowly increase (see below). However, we’re still seeing lower prices than we did in March and April of this year.
Quarter Three Bump
Nationally, we’re seeing single-family housing starts are up 2.74% while permits are also up 4.07% month over month. It’s important to note the national averages do vary by region. For example, when we look specifically at the West, we are seeing that housing starts are actually down 16.05%, however, permits are up 7.01%. Additionally, according to the National Housing Market Index, currently single-family sales, and single-family sales predicted over the next six months, are currently meeting the threshold, which we have not seen since June of 2022. The compilation of this data is pointing towards a quarter three bump, which has been much anticipated and will be very much welcomed.
Builder Confidence and Home Prices
Builder confidence continues to increase and is nearing that magic mark of 50. However, the traffic of prospective buyers continues to drag it down.
Home prices remain up, and although mortgage rate fluctuations have slowed, it’s still over 6% and current mortgage activity remains low. These factors will continue to cause affordability issues, while additional thoughts of a looming recession, growing inflation, and bank instability keeps some buyers on the sidelines for now.
However, according to the National Association of Realtors (NAR), the average existing-home sales price decreased 0.9% which is the second consecutive month of year over year home price decreases, after 131 months of increases. While the demand for homes is absolutely present, 85% of current homeowners have mortgage rates lower than 6%, which makes it all the more risky to sell.
As previously stated, there is still much uncertainty when it comes to the lumber and housing market. However, we’re predicting the market will soon be trending positively.
According to Zonda’s 2023 Building Products webinar, we’re seeing that the supply chain is improving, but it’s far from fixed. Additionally, Zonda suggested avoiding complacency when it comes to margins, share, pricing, or supply chains, as we’re still in an ever changing market.
NAHB recently released their annual Long Term Economic & Housing forecast through 2032, which is an annually released report, and signs are pointing towards a strong market. Currently, the forecast anticipates a 15.2% jump in single-family starts for 2024, with another 7.6% bump for 2025. This would put starts close to what we saw in 2021. Once 2026 hits, NAHB is currently forecasting a decline to flattening.
What We’re Seeing
At Belco, we’re observing an increase in activity nationally. Business is picking up and continues to be elevated as we see housing starts continue to rise. Some are predicting a temporary uptick throughout the summer that will then slow come fall. Regardless of what’s to come, we are seeing a much welcomed surge in overall activity.