Page 10 - Georgia Forestry - Issue 4 - Fall 2022

A Drop in Single-
Family Home Starts
According to Cooney, there are two key drivers to North American solid lumber prices today: the repair and remodel sector and new residential construction. Repair and remodel account for over 40% of lumber and demand, making them the largest end uses, and both are remaining relatively constant. Meanwhile, new residential constructions, specifically single-family home starts, are dropping in tow with the slip in home sales as rate hikes continue. This, however, is likely to be short-lived.
“The end of Q1, it was still houses selling 10, 15, 20% over ask. Multiple bids. Two, three days on the market. How quickly things have changed since then. Affordability is the concern here. There’s all the demand in the world. You could [have built] 2 million homes last year and they all would have sold. Right now, everyone’s spooked about affordability,” said Cooney. “And it’s not necessarily that 5% rates are new. I mean, we’ve seen rates much higher than this 15, 20 years ago.
It’s the speed of rate increases. I think a lot of it is the negative media coverage. You can’t avoid reading news stories on pending recession [and] state of the housing market. Things are still relatively affordable today. Demand is there. It’s sentiment, we think, that’s driven this pullback we’ve seen of late.”
Cooney believes the sentimental impact of the rate hikes will be short-lived as he anticipates rate cuts to come in the first quarter of 2023. The concern he has now lies with the back-and-forth shift in single- family starts versus multi-family starts.
“One shift that we have been keeping a close eye on — this is pretty meaningful impact for solid wood demand and consumption — is the split of multi-family and single-family starts. So on average, a single-family start will consume about three times as much OSB and lumber as a multi-family start. Early in the pandemic, you had this big shift. There were people moving from city centers out to the suburbs and exurbs, and we expected that single-family starts would take off,” said Cooney. “Over the last five years, the split between singles and multis has typically
been 70% singles and 30% multis. Early in the pandemic, that shifted to maybe 72, 73% singles. And now it’s worked back the other way. Singles are back, the last three or four months, to around 67, 68%. So it’s not an eye-catching stat on its own, but when you think about what that means for lumber demand, for solid wood demand and if this trend holds for the next couple of years, you’ve got to take this along with the housing start number you’re getting and then kind of figure out what that means in solid wood demand.”
Demand for Housing
Will Continue
While single-family starts are trending down, Cooney believes it to be temporary based on one statistic in particular: the U.S. has massively underbuilt over the past decade, with between 4 and 6 million units missing from the U.S. market over the past decade.
“If you compare this with let’s say 1995 to 2005, we have not built that many homes. We got nowhere near the 2 million
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8 | GEORGIA FORESTRY