Housing market rocked with mortgage rate volatility
Impact on sawlog demand is observed
MADISON, Wis. – The U.S. housing market was rocked over the summer by the impact of a doubling of mortgage interest rates that started in 2021. Average home sale prices that had shot up 40% in two years flattened out over the summer as the mortgage rate changes showed up in monthly payments on new mortgages and variable rate mortgages.
New housing demand is a core factor in sawlog demand due to the direct impact it has on construction lumber. Its direct impact can be seen in Forest Data Network pine sawlog index prices over the last 18 months, and somewhat less directly in strong hardwood saw log demand and cordwood demand.
New building permits issued nationally in July (a leading indicator of home construction) fell by 8.5% from January. The single-family portion permit numbers fell more dramatically (by 22%).
The total housing units were buoyed by strong increases in new permits issued for multi-family complexes. (This was true nationally, but also in the three Lake States, which all showed strong increases in multi-family projects.)
Permits for buildings with five or more units issued in July across the country grew by 19% over the same unit count in January.
The movement of market share from single-family homes to rental apartments is projected to continue. This underscores the need for the forest products industry to increase its capacity to manufacture structural timber products that can serve as good alternatives for structural uses in larger buildings where steel and concrete are predominant now. Manufactured wood products provide demand for a broad range of products coming from U.S. forests.