VANCOUVER, BC - Unusual for the time of year but a surprise to no one, lumber prices rose further in the second week of January, according to Madison Lumber Reporter.
At the same time, new housing starts jumped in the same period, the report said.
Ongoing momentum of strong demand from the end of 2021 combined with significant supply constraints, most notably from the northwest especially British Columbia, served to keep lumber prices high.
Transportation issues throughout the supply chain caused a feeling of panic among buyers, as the usual 6-week delivery time turned into 2-months or longer. Frustration reigned with customers as the location of wood previously ordered was unknown.
Problems with deliveries were caused by a series of very powerful storms and massive flooding through November, which destroyed all four highways and both rail lines in southern BC, the report said.
U.S. housing rises
An upward bump in US housing starts, again unusual for the season, kept the pressure on for customers to order the dimension lumber building materials they knew they would need for the looming spring construction season.
New home buildings in the US for December 2021 exceeded the historical trend for the time of year. Indeed, total housing starts in the US increased by +1.4% from November 2021 to a seasonally adjusted annual rate of 1.702 million units. This is an +2.5% improvement from the same month one year ago when it was 1.661 million.
Meanwhile, December permits for future home building rose to 1.873 units, a whopping +9.1% gain from the previous month, when it was 1.717 million. December 2021 permits are up +6.7% compared to one year ago when it was 1.106 million.
The backlog of houses authorized for construction but not yet started shot up +1.1% to a rate of 270,000 units last month, the highest on record.
November starts of single-family housing, the largest share of the market and construction method which uses the most wood, was 1.172 million annualized, a drop of -2.3% compared to November when it was 1.199 million.
Building permits are generally submitted two months before the home building is begun, so it's quite unusual for this metric to be rising in December. Normally, not many builders want to break ground on a new house in February. Last year was different; December 2021 single-family permits grew by +8.5% compared to one year ago, when it was 1.128 million units.
Shrewd investors know that construction framing softwood lumber prices are a good leading indicator for US housing activity, including home building and home sales.
Looking at lumber prices, momentum from strong demand at the end of 2021 pushed prices higher, so in the week ending January 14, 2022, the price of benchmark lumber item Western S-P-F 2x4 #2&Btr KD (RL) continued rising; up by +$70 or +6% to US$1,170 mfbm, from $1,100 the previous week, said forest products industry price guide newsletter Madison's Lumber Reporter. That week's price is up by +$367, or +46%, from one month ago when it was $803. That week's price was up by +$226, or +24%, from one month ago when it was $944.
A closer look at the housing data shows that the availability of lots is hampering the speed of new construction coming on. The number of single-family homes on which builders started construction in December dropped by roughly -2% on a monthly basis.
Put another way, the number of housing units that construction companies haven't started work on despite having the authorization to begin building is up +44% from a year ago and is rising on a monthly basis. For each single-family unit completed in December, there were 9.5 single-family units still under construction. This is the highest ratio in the life of the data.
As of December, there were 769,000 single-family homes under construction, a +26% gain from a year ago, and there were 750,000 multifamily units under construction, a 15% increase from December 2020.
Have something to say? Share your thoughts with us in the comments below.