More housing data is rolling in and it is not looking good...but it is 30 days old. Therefore, I am looking for 2-month trends.
- Existing Home Sales declined on rising prices, expanding inventory to 4.5 months...about average...not a shortage.
- New Home Sales increased as did prices, however the 2-month difference is still down 5% on sales and -10% in price.
- The 2-month 15% decline in completions reduced inventory from 9 months to 6 months for the month.
- Multi-family completions are down 40% for two months and multi-permits are down 23% over the 60-day period.
- Single family is steady with starts, permits, and completions bouncing in the +/- 2–3% range.
My conclusion is that housing productivity is maxed out and losing its upward momentum. Component manufacturers as a group are short the lumber market. Specifically, they have jobs sold out as far as three months with no way of covering their lumber needs. Housing, as we build it today, is peaking and our economy will surely slip into recession unless there is a disruption that gives housing a boost. I expect the short-term fix is 30-year fixed rate mortgages under 3% and 40-year fixed rate mortgages under 4%.
The next housing bubble will be created by government intervention, HUD money, Fanny Mae and Freddie Mac guaranteed mortgages. The play is converting the unwilling and unable renters to buyers. When? As soon as the money printed economy begins to show stress in the data. When lower interest rates fail to provide inflation and GDP growth.
Under-bought dealers, treaters, and component manufacturers will reload in early August. Mid-month will catch buying for the jobsite September delivery surge.
Meanwhile, mills are being secretive about production, not disclosing intermittent down time. The autumn surprise would be a longer August–September rally.
Our lumber market cycle in August will see a decline in new orders from builders. They are shifting from footings and framing to drying in. On the other hand, supply side CMs and dealers are under bought and exposed to the upside. Mills will catch an August fill-in buy and preparation for September. That is necessary to absorb rising production in August. August lumber prices will be uneven, responding to housing developments, economy, interest rates, trade wars, and Twitter Battles.
Looking Forward...ML
A veteran lumberman, Matt Layman publishes Layman’s Lumber Guide, the weekly forecasts and buying advisories that help component manufacturers save money on lumber purchases every day. You can reach Matt at 336-516-6684 or Matt@laymansguide.info.
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