Where to from here?

The mad dash to Boxing Day sales across Canada this week has been described as debt-defying, in deference to repeated warnings that escalating household debt is our country’s “biggest domestic economic risk.”  And what’s the largest contributor to household debt in Canada?   The $1.079 trillion residential housing sector, which also happens to be the largest contributor to consumer spending that’s been juicing our country’s economy through the 2008-09 recession to present.  While economic forecasters hope for ‘soft landings’ in our overheated housing market, encouraging signs south of the border point to guarded optimism of being further down the track to recovery from the housing debacle that was.  As we look to the New Year, we share the glass-half-full point of view!

“More Runway..”

“Housing will add to U.S. growth in 2012. After declining relentlessly for six consecutive years, and dropping to a record low of barely a 2% share of GDP, residential construction is finally poised to add (ever so slightly) to U.S. growth next year.  Homebuilder sentiment is slowly improving, home sales are creeping off the bottom, and rising rents are spurring construction of multiple-unit buildings.  Some of this simply reflects an improvement from incredibly depressed levels, and, even with modest strengthening, home prices will take longer to turn the corner.  In a related development, we also look for consumer spending to grow faster in the U.S. than in Canada, for the second year in a row. With U.S. job growth finally catching up to Canada, and plenty of pent-up demand, there is simply more runway for U.S. consumers.”

Five Fab Facts for 2011 & Five Fearless Forecasts for 2012 – BMO

Christmas Letters

I remember reading the earliest editions as a kid.  And much later, I would learn firsthand how well-received ‘The Christmas Letters’ were in the industry.  As Ernie says, “During my career in lumber wholesaling, we always looked forward to a so-called ‘pause’ during the Christmas Holiday Season.  After my two partners, Boyd Kelly, Ran Davidson and I established Col-Pac Lumber in 1972, we made a practice of sending personal year-end letters to our lumber contacts.”

Upon my dad’s retirement in 2003, he gave me the complete collection – a binder full – going all the way back to 1972.  I tend to open the binder each December.  Like tiny time capsules, each letter offers a glimpse between the lines… of the challenges, politics, markets – change – through the years.  Links to a small sampling are below.

A Wholesale Encounter with Santa – 1995

O Tannenbaum – 1992

Turning Point?

A string of reports to come this week is expected to confirm the U.S. housing market has bottomed:

  • Monday – Home Builders Sentiment Index  (21 in Dec, 19 in Nov)
  • Tuesday – Housing Starts (+9.3% to 685,000,  permits +5.7%  Nov)
  • Wednesday – Existing Home Sales (+4% Nov)
  • Thursday – House Price Index (-0.2% Oct)
  • Friday – New Home Sales (+1.6% Nov)

One economist in this article from Reuters acknowledges a slow “curing” of the housing market is underway, while reminding it will be “a multi-year process.”  Three reasons for cautious optimism are cited:

  1. Inventory of new homes at record low
  2. Home Builders sentiment on the rise since June –  to a level last seen in April 2010, when taxpayer credit encouraged home buying
  3. Mortgage lenders have loosened down payment requirements, qualifying more people to buy.

Meanwhile, there’s strong growth in the construction of rental units, “a trend expected to continue next year.”  Speaking of housing trends, Renting Gets Glamorous?

A Thousand Words?

They say a picture is worth a thousand words. The arrival of a brand new baby sister for daughter at our house… is keeping the camera busy… which means there will be fewer words posted on this blog.. between feeding times this week  at least.  Happy to report though, that everyone is doing well and, in keeping with objectives around here, my wife delivered right on time!

New Markets?

It’s been a while since demand for lumber has been described as ‘out of this world’.   But Hark!  In keeping abreast of market potential to offset cyclical demand in North America, scientists tell us they’ve discovered new territory out there.  Astronomers this week reported the discovery of an Earth-like planet that is in the “habitable” zone with balmy, Hawaii-like average temperatures.  It comes with its own challenges in terms of ‘just-in-time’ delivery though, considering it’s 600 light years away!  For the moment, we have no plans to calculate freight rates to Kepler-22b – at least not until we get trucks moving in the direction of The Dakotas.

Supply & Demand

There’s a good dose of vanilla available in “The Chinese Demand for B.C. Lumber” posted at B.C. Business today.  By page three, an analyst from RBC Capital Markets offers a reminder that “U.S. housing formation numbers are the key indicator” – noting these numbers are slowly beginning to show improvement.  Many supply and demand factors cited in the article do lend credence to the theory of a coming super-cycle.