With continued low demand in housing and other construction-related sectors, and the importance of these markets to the secondary wood products industry, the third annual housing market survey was conducted in 2012 to discern the status of the secondary wood products industry. This year’s article is a continuation of studies reported in the July 2010 and July 2011 issues of Wood & Wood Products. Three hundred and seven responses were received from woodworking professionals for this year’s survey, representing a variety of secondary wood products companies and products from across the United States. (See the “About the Survey” at the bottom of this article for more details). The studies are a joint effort by Virginia Tech, the USDA Forest Service, and Wood & Wood Products based on online surveys conducted by Wood & Wood Products of their subscribers. As in previous years, the objective was to update trends in the industry and analyze what has changed in terms of market conditions, company performance, and the actions being taken to remain profitable.
Housing Market Overview
With inventories still relatively high by recent historical standards, and demand for new construction low, housing markets remain difficult. This obviously has a negative effect on demand and profitability for the secondary industry. However, according to figures from the U.S. Census Bureau and National Association of realtors, housing inventories have been trending downward since July of 2011, with just over a 5 month supply of new homes and just over a 6 month supply of existing homes reported for March of 2012. Both numbers have peaked near 12 months at different points over the past three years.
Unfortunately, declining inventories did not show up in terms of new construction activity in 2011. Census Bureau figures show single family starts numbered 431 thousand units for 2011 , which was an8.5 percent decrease from 2010 and the lowest total since modern records began in 1959. Through March of 2012, however, starts had improved slightly to a seasonally adjusted annual rate of 462 thousand units.
click image to zoomFigure 1: Value of Private U.S. Construction, 2002-2011 As shown in Figure 1, the value of private construction in the United States for 2011 was very similar to that of 2010 for the major sectors indicated , with 2011 bringing slight improvement in nonresidential construction after two years of decline. Also of note is that spending on residential improvements (remodeling) was very similar to, or slightly higher than, spending on single family housing construction for the third straight year.