Timberland

U.S. Housing Starts Outlook as of Mid-Year 2014

U.S. Housing Starts Outlook as of Mid-Year 2014

In the timber industry, we care about housing starts because increased home building leads to growing demand for lumber and other building products and, ultimately, periods of strengthened stumpage (timber) prices. Each six months, when updating our Forisk Forecast timber models for the United States, we review prior projections and study research on forecasting to apply lessons learned. While core trends and economic research affirm positive, but slower than expected, growth in construction and demand for homes, recent figures fail to generate much enthusiasm. The Housing Starts gods continue their pregame warm-ups. And so we continue wait.

Updated Housing Starts Outlook for 2014

Forisk’s Housing Starts Outlook combines independent forecasts from professionals in the housing industry. As of August 2014, these include Fannie Mae, Freddie Mac, Mesirow Financial, the National Association of Home Builders (NAHB), The Conference Board, and Wells Fargo, as well as long-term assumptions from the Energy Information Administration (EIA) (Figure 1).

Figure 1. Forisk Forecast U.S. Housing Starts Outlook, Base Case

Figure 1. Forisk Forecast U.S. Housing Starts Outlook, Base Case

Forisk’s updated (August) 2014 Base Case peaks at 1.58 million housing starts in 2019. For comparison, our February 2014 Base Case peaked at 1.63 million housing starts in 2019. Overall, housing has slowed, with projected totals for 2014 dropping 9% from 1.1 million to 1.0 million.

The reduced projections for housing starts in 2014 reflect adjustments across housing economists. Most changes reflect modified views on the timing as opposed to new ideas on the potential for long-term economic growth in the United States. Of the individual housing forecasters tracked by Forisk, Freddie Mac made the most substantive adjustments, dropping projected starts by 11.3% (130K) for 2014 relative to expectations as of February 2014. The Conference Board and Mesirow Financial made the most modest adjustments, reducing projected housing starts by 7.3% (80K) and 7.5% (80K) relative to expectations as of February 2014.

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About the author

Brooks Mendell, Ph.D.

Brooks Mendell, Ph.D. is President and Founder of Forisk Consulting, a forest industry, timber REIT, bioenergy and timber market research firm. Dr. Mendell has over fifteen years of operating, research, and consulting experience in forest business and finance. Mendell has published over sixty articles and two books on topics related to timber and timberland REITs and markets, forest business management and operations, and communication skills.

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