Mark Kennedy is Executive Director, Forest Products Equity Research at CIBC World Markets. Through this blog, I had the good fortune of connecting with Mark last spring. I always look forward to our occasional chats to learn more about the big picture in terms of forecasts, and the U.S. housing market in particular. As the U.S. housing market continues to show signs of recovery, Mark notes forecasters are beginning to increase their housing start expectations in the United States. At CIBC, estimates are 900,000 starts in 2013 and 1.05 million in 2014. Estimates elsewhere indicate 1.5 million starts in 2015.
While growth in U.S. lumber demand appears likely, sometimes I wonder whether U.S. housing starts in the years ahead will follow such a predictable trend higher. Volatility and uncertainty is the ‘new normal’ it seems. With so many conflicting forces at play throughout the world, market sentiment is more erratic than ever. And all this at a time when industry is monitoring serious concerns about sustained fibre supply. When I questioned the pattern of projected housing starts during my chat with Mark yesterday, he pointed to a familiar string of positive housing market indicators – but also drew my attention to a bullish Reuters article suggesting accelerated jobs growth in manufacturing, spurred on by a surge in U.S. exports.
With evidence of an abundance of factors influencing supply and demand predicted to intersect at some point in the future, it’s interesting to contemplate the ‘when’ and ‘how’ – and magnitude – of what may unfold in our industry. For now, there’s little debate the underlying strength in lumber prices appears set to continue.