As we move away from the Christmas and New Year’s holidays, some contacts reported business picked up during the early part of the year. With U.S. residential construction expenditures being at their highest for a third consecutive month, exceeding $600B (US), the highest rate in 14 years, according to the U.S. Census Bureau October statistics, this has been a strong driver for demand of Hardwood finished goods. The most recent data available in October noted that total private residential spending topped the previous year by 14.5 percent to $637B. This is due in part to inventories of new and existing homes being extremely low, with homeowners opting to upgrade their homes because of limited new and existing homes for sale. This has provided some respite for Ontario and Quebec Hardwood producers and secondary manufacturers of moulding, flooring and cabinets, and other products, as sales to the U.S. improved slightly for them. With the demand comes the struggle to ramp up mill output, and tighter supply chains as the country is still going through the second wave of COVID-19. Companies are still experiencing difficulty in finding qualified workers in the forestry and Hardwood sectors. This has also resulted in prices rising higher for a number of species, grades and thicknesses.
Canadian residential renovation has also risen due to COVID-19 pandemic as people stayed home and focused on renovation projects. The housing market is seeing a very active resale market, especially in Ontario and Quebec, where there was a bidding war on sales of homes going on during the fall and early winter.
As sawmills have focused on other species or on limited log decks, Ash production has not met some buyers’ needs, with prices noted as having increased slightly. Demand for this species on domestic and overseas markets has been steady, but the lower mill output are keeping inventories thin for some grades and thicknesses of kiln-dried Ash.
With the colder weather upon us, logging conditions improved. Demand for Birch is solid, caused by a strong domestic housing market in both Canada and the U.S. Demand for green Birch is readily absorbing developing supplies. Some report that kiln-dried inventories remain low. Secondary manufacturers and wholesalers would like to ramp up their supplies.
Aspen supplies have started to improve in certain areas contacted. Green production increased over late November and December. Some noted there were spot shortages, which kept prices in a firm mode for this species. Kiln-dried inventories were reported as somewhat low relative to demand.
With the improved housing market and residential renovations, demand for Basswood increased for Hardwood finished goods. Demand is keeping pace with developing production resulting in increased prices for certain grades.
Heading into the holiday season, business has been usually disrupted during this time for Hardwood lumber. This has not been so as some lumber shortages kept activity at a high level for Hard Maple. Demand for developing green Hard Maple is reported as strong, with prices rising.
Demand for Soft Maple is also good with demand keeping pace with production. Some contacts commented that supplies were thin for several grades and thicknesses.
Demand for Red Oak across the border from secondary manufacturers and distributors is strong, although according to data, cross border trade is below last year’s levels. Demand from overseas markets has increased. Kiln-dried inventories are reported to be low. Markets for many grades and thicknesses of green stocks are also solid. Production is barely keeping pace with demand.
It was noted that there had been an improvement in the demand for White Oak on domestic and export markets since the middle of 2020. With production having been low for a time, kiln dried inventories were down. The strong demand and low supply continue to pressure prices higher.
According to an RBC Home Buying Sentiment Poll, found that while over 75 percent of respondents are concerned about the financial impacts of COVID-19, 31 percent are willing to help their children or an immediate family member pay for a new home. Twenty-five percent of Canadians polled stated they were providing more financial support to their family as a result of the pandemic.
RBC’s vice-president of Home Equity Finance, Products and Acquisitions stated that as more people continue to work and spend time at home, many Canadians want to continue on their path to homeownership. Even during these uncertain times, families are continuing to rally around each other and financially support their loved ones as they work towards buying a home.
The poll also found 66 percent of Canadians are concerned about how the next generation and their children would be able to afford a home, with over 50 percent thinking affordability will only worsen in the near future. Despite this, 81 percent still believe homeownership is a good investment while 29 percent agree it makes more sense to rent than buy right now.
Despite low interest rates, which the Bank of Canada projects will remain at historic lows until 2023, steady appreciation in house prices is expected to put a dent in affordability and dampen housing demand next year, cautioned the economist.
The report continued that jobs and incomes were not expected to grow as firmly as previously expected in 2021, while the government’s massive income support programs are likely to be wound down. Builders saw a sharp rise in prices for four major building materials in third-quarter 2020, led by skyrocketing lumber prices. Lumber price increases have since eased.
Immigration to Canada plunged during the pandemic, going negative in some provinces and falling from 234,000 in 2019 to a projected 80,000 in 2020, according to Statistics Canada. The economist said the drop in immigration would have a negative impact on housing sales.
The regional outlook, according to Altus Group for Ontario is that the housing starts were on track to close out 2020 significantly higher than 2019, due to a resurgence in single-family and apartment starts since the provincial reopening. Low mortgage rates and a resilient homebuyers’ job market will spur housing demand in 2021. For Quebec, despite a COVID recession and low immigration, starts came in stronger than pre-pandemic expectations in every quarter. Housing starts were on track to reach a 10-year high in 2020 but weak new condominium apartment sales point to lower starts in 2021.
