October 10, 2011
October 10, 2011
By Rick Sohn
Housing starts are low, and will likely go lower in winter, but mortgage interest rates are at record lows. Unsold inventory is not rising. See below for details and a six-year span of prices and analysis of lumber, logs, housing, and mortgage stats.
Information and interpretation.
The biggest news is the plummeting 30-year fixed rate mortgage interest rate — to 4.27 in August, and 4.11 in September, a record low for one month since 1971, when these records started. (This late report allows us to show September).
The unsold home inventory is steady — below 6 months inventory for 3 out of the last 4 months. Building permits are up while housing starts are down, perhaps because of the cost of mortgages is so low. Interestingly, corrected numbers show starts and permits tracking extremely close to one another for June and July. This is not common.
It is simply too expensive to build a new house, with so many cheaply priced used homes on the market. As we approach winter, housing activity will likely stay at low levels.
Stud prices are the steadiest statistic on the chart this month. Compare the line of stud prices to the line of log prices. The ratio of studs to logs, tells us something about the cost of raw material and the profitability for mills. At present, the ratio of studs to logs is 0.43, in-between a ratio of 0.5 in August of 2009 (cheaper logs for mills) and 0.34 in August of 2006 (more expensive logs for mills) – relative to product price.
One unrelated piece of good news: College student interest in forestry is up. At a meeting at Oregon State University this week, Forestry School Dean Hal Salwasser reported that that OSU has 1000 students in the Forestry School this Fall. That’s the most since the 1970’s. As the Baby Boomers continue to retire in large numbers, over 10,000 per day across the country for the next 19 years (in all jobs) there is hope that these students will find jobs, even in a slow economy.
Data reports used with permission of:
1) Random Lengths. 2”x4”x8’ precision end trimmed hem-fir studs from southern Oregon mills. Price reported is Dollars per Thousand Board Feet for the most recent week. One “board foot” of product measures 12 inches by 12 inches by one inch thick.
2) RISI, Log Lines. Douglas-fir #2 Sawmill Log Average Region 5 price. Current report is for the prior month. Dollars per Thousand Board Feet of logs are reported using standardized log measurements from the “Scribner log table.”
3) Dept. of Commerce, US Census Bureau. New Residential Housing Starts and New Residential Construction Permits, seasonally adjusted, annual rate. Current report is for the prior month. Recent reports are often revised in bold. Also, major revision made each May, reaching 21/2 yrs back.
4) Regional Multiple Listing Service RMLSTM data, courtesy of Janet Johnston, Prudential Real Estate Professionals Broker, Roseburg, OR. Inventory of Unsold Homes (Ratio of Active Listings to Closed Sales) in Portland Oregon, for most recent month available.
5) Freddie Mac. Primary Mortgage Market Survey. 30-year Fixed Rate Mortgages Since 1971, national averages. Updated weekly, current report is for the prior full month.
Issue #4-9. © Copyright Rick Sohn, Umpqua Coquille LLC. For permission to reprint for nominal fee, Email [email protected]
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