Back in 2011, the North American Wholesale Lumber Association (NAWLA) Regional Meeting in Vancouver featured three excellent speakers: Daryl Swetlishoff (Head of Research, Raymond James Ltd), Oscar Faoro (Special Projects, Canadian Wood Council), and Jim Jia (President, L J Resources Ltd). I recall catching up with Oscar following his informative presentation on multi-family, sustainable densification. He openly laughed at analyst projections that U.S. housing starts would return to 1.4 million by 2014. “It’s not going to happen like that!” asserted Oscar.
… Fast forward to today. Housing starts are at an annual pace of 976,000. The rate of multi-family starts grew by 21% in the first eight months of the year, while single-family starts grew just 2%.
Today’s MNI News Reality Check here is packed with surprisingly forthright quotes. It’s a good read. In the piece, Paul Jannke of Forest Economic Advisors, a bull in a Bruins jersey at NAWLA Vancouver 2012, now contends that demand for housing will not sustain an upturn in lumber prices. Says Jannke, “If you’re selling 400,000 (homes), why do you need to build 1.4 million? If you look at the actual demand for housing, it’s not as high as people think it is.”
… Could it be that housing starts data has taken on “a different meaning for the lumber industry”, as Shawn Church at Random Lengths suggested here, back in March?
“Lumber producers are making a lot of money producing lumber right now, and what do you do when you make a lot of money? You produce more lumber. It’s unlikely that we are going to see a significant increase in lumber prices.”
– Paul Jannke, Forest Economic Advisors (Sept. 2014)
Inextricably tied into lumber market activity, home values make news on both sides of the border. In Canada, where it’s reported house resale prices are 66% higher than resale prices in the U.S., we’re told real estate now accounts for more of the economy than oil and gas and manufacturing combined. In a blog post this week, former MP Garth Turner confirms, “Canadians have decided there is only one asset they can trust – their homes, regardless of the cost.” Pointing to “artificially cheap money” over the past five years, he says that here in Canada “real estate became a cult, then a mania and finally a religion. As a result, risk has elevated exponentially… Half of us couldn’t survive one missed paycheque and the Millennials can’t climb out of basements.”
I received an email this morning from a personal connection in Southern California who read the same post. He writes, “Them be dire words from Garth Turner and must be most concerning for Canadians who witnessed the U.S. market meltdown. We know the wrath of a market meltdown on a personal basis. We purchased our Murrieta, CA home in September 2001 before the price run-up which was not the case for thousands of homeowners who lost their homes to foreclosure.” He references the assessed values of his house (see below) from the purchase through the bursting of the bubble and to the present, while adding his own comments. He notes: “A lot of homes were sold in our development during the years 2005-6-7 with virtually 100% of those buyers walking away from their underwater mortgage.”
Sept 2001 – $317,000 .. Purchase Price
Dec 2002: – $337,000
Dec 2003: – $377.000
Dec 2004: – $413,000 .. Should we buy that waterfront property?
Dec 2005: – $450,000 .. Lets rather take out a home equity loan
Dec 2006: – $600,000 .. and buy that villa in Spain.
Dec 2007: – $710,000 .. This sure does beat working for a living.
Dec 2008: – $400,000 .. What happened?? Not our best year ever.
Dec 2009: – $325,000 .. Talk about a hair cut!!!!!
Dec 2010: – $300,000 .. Yikes.. Hang on.. this thing’s no joke!!!
Dec 2011: – $310,000 .. Maybe as a greeter at Walmart you say???
Dec 2013: – $450,000 .. The forecast suggests the storm is waning.
Sep 2014: – $420,000 .. Not sure if we can stop holding our breath…yet..
Just when you thought there might be limits to expanding markets for wood, we might have come full circle. A wooden hamster wheel in every office! The perfect antidote for inactivity. Full Story (HT: C. Sainas)
The Mexican state of Baja California Sur was hit last week by category 4 Hurricane Odile. It was the strongest storm on record to hit the region. The town of San Jose del Cabo was devastated. Many of us here at Dakeryn Industries have enjoyed vacations in the area and are compelled to do whatever we can to help the indigenous people of the Baja. A number of families have lost everything – from the shoes on their feet to their homes. Our plan is to raise funds to provide immediate relief in the form of clean water, food, medical service/supplies, shelter – and building materials for restoration.
Dakeryn has opened a trust account for donations of all sizes by cash, cheque, or credit card by clicking the “Make a Donation” PayPal button below. We’re ambitious in our fundraising efforts and thank you in advance for any donation you might be able to offer. The daily minimum wage in Baja California Sur is 57.46 pesos, or $4.75CAD.. per day. A donation of $25 amounts to one week’s pay, $100 amounts to one month’s pay, and so on. Dakeryn will match all donations up to $10,000. Fundraising tracker here. Thanks to everyone who has already reached out!
This week, international representatives at the United Nations will be discussing the rising rate of carbon emissions. The following segment from The New York Times sheds more light on the subject, a topic of heightened interest for all of us.
“Deforestation accounts for about 20 percent of global emissions of carbon dioxide. The assumption is that planting trees and avoiding further deforestation provides a convenient carbon capture and storage facility on the land.
That is the conventional wisdom. But the conventional wisdom is wrong.
In reality, the cycling of carbon, energy, and water between the land and the atmosphere is much more complex. Considering all the interactions, large-scale increases in forest cover can actually make global warming worse.
Of course, this is counterintuitive. We all learn in school how trees effortlessly perform the marvel of photosynthesis: They take up carbon dioxide from the air and make oxygen. This process provides us with life, food, water, shelter, fibre, and soil. The earth’s forests generously mop up about a quarter of the world’s fossil-fuel carbon emissions every year.
So it’s understandable that we’d expect trees to save us from rising temperatures, but climate science tells a different story. Besides the amount of greenhouse gases in the air, another important switch on the planetary thermostat is how much is reflected back to space. The dark colour of trees means that they absorb more of the sun’s energy and raise the planet’s surface temperature.”
– To Save the Planet Don’t Plant Trees – The New York Times, 19 Sep. 2014
While the good news in reported U.S. housing starts is an 8% increase year over year, clearly the annual pace of single-family construction is falling well short of early projections. As noted in a February post here, a forecast from the National Association of Homebuilders (NAHB) called for single-family production to reach 822,000 units this year – an increase of 32 per cent over last year. The August data released this morning indicates an annual pace of 643,000 – an increase of just 4 per cent. The data underscores ongoing uncertainties hanging over housing activity despite confirmation of continued low interest rates coming out of Fed reports this week.
Meanwhile, the NAHB confirms softwood lumber prices rose 2.4 per cent in August, but are down modestly from an earlier March peak. In the face of gradually increasing demand for building materials, the NAHB attributes price softness to “additional productive capacity being brought back to the wood products sector”. As one lumber trader was overheard to say, “Nothing solves high prices like high prices”.
On my daily commute to work, time seemingly stands still each morning – for 12 minutes. That’s how long it takes for the SeaBus to cross Burrard Inlet, linking downtown Vancouver with the North Shore. When the sun glitters off the rippling ocean, the panoramic views while aboard this passenger-only ferry never get old.. from the splashy cruise ships at Canada Place, to Stanley Park, the Lions Gate Bridge, North Shore Mountains, Lonsdale Quay and the Burrard Dry Dock Pier, to the Ironworkers Memorial Bridge, Indian Arm, and the big cargo ships anchored near Canada’s largest port.
Could it be that this unique commute has value-added benefits? The results of a recent study involving 18,000 commuters would suggest so, reports The Washington Post here. “The longer people spend commuting in cars, the worse their psychological well-being,” concluded the study, which cites a number of positive effects for commuters who don’t drive, including improved concentration at work. And while walking and cycling were found to be most beneficial, public transit offered similar benefits over driving a car. “You might think that things like disruption to services or crowds of commuters might have been a cause of considerable stress,” said one researcher. “But buses or trains give people time to relax, read, socialize, and there is usually an associated walk to the bus stop or railway station; it appears to cheer people up.” Especially lumber traders.
from the North Shore – SeaBus approaches Vancouver skyline