Compression

While screens tuned to lumber futures turn red again, an optimistic outlook comes after talking with a well-connected trader in the U.S. market. He suggests 2013 will mark the first year in many we’ll see real ‘compression’ in building activity; a true building season when summer finally dries up unseasonably wet job sites presently on hold, waiting for foundations to be poured in the Midwest. While building permit data signals residential construction is set to pick up steam, the speed bumps beyond weather are well-known. As example, “the competition for skilled workers has gotten so heated,” in Texas according to this story from CNN Money, “some construction companies are even poaching workers off each others’ job sites. Rival contractors may come right up to the job site to recruit, enticing workers with the promise of higher pay.” We’re told the National Association of Home Builders (NAHB) reported in March that 46% of its members have fallen behind schedule on finishing projects, 15% turned down jobs, and 9% lost or canceled sales because they can’t find enough workers.

We know that seasonally adjusted annual U.S. housing starts were 853,000 in April, down from 1.02 million (-16.5%) in March (Source). While permits in April surged 14.3% to a five-year high (1.02 million annualized), May brought record rainfall across much of the Midwest. What’s the over/under on May housing starts data to be announced June 17th?

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