Housing starts fall more than expected in August
US home building fell in August after strong gains in the
previous three months but the housing market remains
supported by record-low interest rates and demand is good
for properties in the suburbs and low-density areas as
many people consider a future of working from home.
Housing starts dropped 5.1% to a seasonally adjusted
annual rate of 1.416 million units last month according to
the Department of Commerce. Data for July was revised
slightly lower to l.492 million annual pace from the
previously reported 1.496 million.
Home building in August was pulled down by a 22.7%
tumble in starts for the volatile multi-family housing
segment but construction of single-family housing units,
which accounts for the largest share of the housing market,
increased 4.1%. Groundbreaking activity rose in the West
and Midwest but fell in the South and Northeast.
Canadian housing starts rose for the third consecutive
month in August. Based on a recent update from the
Canada Mortgage and Housing Corporation (CMHC), the
construction of new homes was up month-on-month in
August, with a total of 213,144 new starts reported, up
from 204,597 units in July.
The CMHC says higher multi-family starts in Ontario,
including in Toronto, drove the national increase after a
total of 5,243 new housing starts were launched in August,
up 67% from the same time last year. CMHC believes that
national starts will begin to trend lower by the end of 2020
as a result of the negative impact of the pandemic on
economic and housing indicators.
Existing home sales near 14-year high in August
US home sales surged to their highest level in nearly 14
years in August as the housing market continued to
outperform the broad economy, though record home prices
could be an obstacle for first-time buyers.
The National Association of Realtors said that existing
home sales increased 2.4% to a seasonally adjusted annual
rate of 6 million units last month, the highest level since
December 2006. Data for July was unrevised at 5.86
Sales increased from July to August in all four regions, up
13% in the Northeast, 1.4% in the Midwest, 0.8% in the
South, and 0.8% in the West. Sales last month
concentrated on the higher priced homes. Existing home
sales, which account for the bulk of US home sales, were
10.5% above that of last August.
Builder sentiment soars but timber prices of concern
With demand for housing surging US homebuilders are
positively ebullient. Builder confidence in the market for
single-family homes in September increased 5 points to 83
on the monthly NAHB/Wells Fargo Housing Market
Index. That¡¯s the highest reading in the survey¡¯s 35-year
history, which matched its last all-time high in August.
Anything above 50 is considered positive. The index stood
at 68 in September 2019.
All three of the index¡¯s components rose to record highs,
current sales, sales expectations, and traffic of prospective
While housing demand is incredibly strong, builders
continue to be dogged by a lack of skilled labor and
finished lots. And now, there¡¯s a new hurdle ¡ª fast-rising
prices for sawnwood due to the Covid-19 crisis and the
raging fires in the American West.
Sawnwood prices have jumped more than 170% since
mid-April, adding more than US$16,000 to the price of a
typical new single-family home, according to the NAHB.
Some sawnwood producers shut down in March and April
as the pandemic hit the US and did not expect to see the
quick surge in housing demand that began in late May.
Ramping up production, while protecting workers with
social distancing was not easy and supply suffered.
Now the Western fires are adding to the strain.
Weyerhaeuser, the nation¡¯s largest sawnwood producer,
has cautioned that ¡°several of the fires have reached the
company¡¯s timberlands, but it is too soon to assess the
affected acreage or potential business impact.¡±
Weyerhaeuser manages about 1.6 million acres of forests
in Oregon and 1.3 million acres of forests in Washington.
The company operates three mills in Oregon and two in
Washington, with one building materials distribution
center in each state.
Wood products lead manufacturing growth but
furniture output contracts
Economic activity in the manufacturing sector grew for
the fourth consecutive month in August, according to the
nation's supply executives in the latest Manufacturing ISM
Report on Business.
For the third consecutive month, wood product
manufacturers reported the highest growth among
manufacturing industries. Of the 18 manufacturing
industries, 15 reported growth in August.
However, those in the Furniture and Related Products
category, which in July was second in growth, was among
the few areas that reported contraction in August.
ISM warns that office furniture has joined commercial
aerospace and the oil and gas sector as manufacturers
impacted by low demand who are holding off on capital
investments for the rest of 2020.
Overall, the survey response was optimistic, with demand
and consumption driving expansion growth as supply
chains restarted and adjustments were made for employees
to return to work.
Consumer sentiment index reaches highest level since
While the University of Michigan¡¯s consumer sentiment
index has climbed to its highest level since March, it
remains well below its February reading that was above
100. University analysts said the preliminary reading of its
US consumer sentiment index in September was 78.9, up
from 74.1 in the previous month.
The sentiment indicator covers how consumers view their
personal finances as well as business and buying
University of Michigan economist Richard Curtin says
over the next several months there are two factors that
could cause volatile shifts in consumer confidence: how
the November 3rd US election is decided and delays in
obtaining COVID-19 vaccinations.
Unemployment falls but job creation slows
The August Department of Labor employment report
shows US payrolls increased by 1.37 million with most
hires coming in government and retail.
About 10.6 million jobs have been added since May,
bringing the unemployment rate to 8.4%, down from a
peak of 22.8% in April, when tens of millions of jobs were
a casualty of nonessential business closures.
The August figure is the second straight month-overmonth
decline, down from 1.7 million new payrolls in July
and 4.8 million in June, as the country attempts recovery
from the COVID-19 lockdown. More than 40% of the new
jobs in August came in the form of government and retail
hires. About 344,000 hires were made by the federal
government, in large part temporary workers to run the
2020 national census.
In August, manufacturing employment rose by 29,000,
with gains concentrated in the nondurable goods
component (+27,000). Despite gains in recent months,
employment in manufacturing is 720,000 below February's
Sawnwood, the material in short supply
According to the US Chamber of Commerce's latest
commercial construction index, sawnwood is currently the
most reported material shortage.
In a press release the Chmber says "Over half of
contractors report facing shortages for at least one
material, up from 45 percent in Q2". Wood and/or
sawnwood is the most reported shortage at 11 percent, up
from 5 percent last quarter."
Additionally, contractors say the impact of coronavirus
still looms large, but its perceived impact is lessening over
time. Nearly all contractors (85%) are still experiencing
delays due to the coronavirus outbreak, with 83%
expecting delays to continue into the fall and 71%
expecting delays will remain through early 2021.
However, the average amount of delays has decreased
sharply as the year continues. In July, contractors reported
an average share of 26% of their projects were delayed,
down from 40% in April.
No evasion determination in Concannon sawnwood
The International Wood Products Association reported
that US Customs and Border Protection¡¯s internal
appellate body has reversed CBP¡¯s previous determination
of evasion in the case of Certain Hardwood Plywood from
the People¡¯s Republic of China for Concannon
Concannon¡¯s attorneys Mowry & Grimson PLLC argued
that the hardwood plywood the company was importing
from Vietnam was manufactured in Vietnam and did not
evade the antidumping and countervailing duty orders on
covered merchandise from China.
This is a victory for US companies that take responsible
steps to ensure that they are not importing dutiable
merchandise from China.