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US housing start slump has local implications

The US economy appears to be in good shape, if we take into account high levels of employment and factors like wages growth. Forest2Market in the US commented recently that despite positives on a range of fronts, the critical residential construction sector is under-performing, with private housing starts falling 0.9% in June to a seasonally adjusted 1.253 million units. Source: Timberbiz

They summed the situation up neatly, saying:

“By all accounts, the new housing market should be booming. It’s a puzzling conundrum that it’s not, given all of the positive economic news… other indicators suggest the US housing market may be in the final stages of its present growth cycle.”

In particular, Forest2Market points to factors that might make decision-makers concerned that there are long-term challenges to household formation that ultimately drives demand for dwellings and timber and wood products.

They identify the US birth rate falling to its lowest level in 32 years, which in 2018 was 2% lower than in 2017 and recorded its fourth successive annual decline.

The effect of a smaller number of people looking to form new households in two decades’ time is evident. There will be less new house

holds. But just as significantly, with fewer females getting married and having children later … “the socio-demographic incentives to start their own household are weakening”.

Suppressed demand for housing – especially of the family preferred free-standing houses – will therefore commence pretty much as soon as birth rates slow.

The US situation is of interest in Australia for two reasons. The dynamics are unlikely to be very different to those in the US secondly, because a softer US housing market means weaker global demand for sawn timber. Excess supply destined for US markets has regularly found its way to Australia in the past, and there is to reason to assume that could not occur again.

Sawnwood import data will be eagerly assessed each month, as local producers and importers alike look to understand the market, their options and how it changes pricing.

The full text of the Forest2Market analysis can be read at

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