Lumber contacts remain optimistic as we move into 2022, and all hope that the Coronavirus will soon be a thing of the past. Despite the challenging period everyone is experiencing, they see it as an opportunity to be more creative, to expand and seek new clients as the strong housing market is having a positive effect on their businesses. Secondary wood products manufacturers also reported favorable business conditions. Many indicated lumber inventories were adequate. Sawmills have kept busy producing whitewoods to meet the continuous demand for these species.
At the time of this writing, Ash log receipts to sawmills were limited, noted operators, while green No. 2A and Better has been selling well. End users are purchasing green Ash, as available, as are wholesalers and those who export this species. Export markets to Europe are good, as well as for China and Vietnam.
Cherry is readily available as demand for this species is rather low. Those with established overseas customers were seeing good order files.
The regionally important species, Hard Maple, is going strong to wood components, flooring, and cabinet producers. Some switched to Soft Maple to control costs, making Soft Maple scarce in some areas and more costly, which returned the higher demand to Hard Maple. Demand for No. 1 Common and Better and No. 2A grades are top sellers.
Soft Maple demand is high. Sawmills and kiln dryers are pushing this species ahead of others to meet growing demand, even though in some areas it is lagging demand, thus prices are seeing a slight rise.
According to flooring manufacturers, sales of Oak for residential and truck trailer flooring in 2021 was one of the best years for sales in recent memory. Even though there are still shortages of qualified workers, some were successful in hiring new employees. They see 2022 as being better than 2021, and with a strong housing market on both sides of the border, they are even more optimistic this will be the case.
Red Oak availability is currently meeting or exceeding market needs depending on areas contacted, with prices being stable. White Oak production increased in the last six months of 2021, with competition for White Oak logs having intensified. Certain contacts commented they are struggling to sell certain grades and thicknesses. Availability of green Red Oak is adequate to meet or exceed market needs.
Contracts also reported Poplar sales are doing very well domestically.
There is keen competition for Walnut, especially for quality logs. Production has been steadily increasing with most grades and thicknesses moving on both domestic and export markets, especially to the UK and Germany.
The majority of Canada’s biggest mortgage lenders forecast a robust housing market this year, with some seeing double-digit sale increases and sharp price hikes, despite rising lending rates and a shortage of homes for sale. The outlook from the Big Six banks parallels that of the Canadian Real Estate Association, which expects home sales to increase 8.6 percent compared to last year, with prices rising 7.6 percent.
The bank forecasts, however, are shadowed by the fact that their analysts expect the Bank of Canada lending rate to increase by about 1 percent by the end of 2022, in a series of hikes.
The Royal Bank of Canada expects home sales to increase 19.8 percent from a year earlier, with the average home price increasing 3.3 percent. They expect extremely tight demand-supply conditions will keep prices under intense upward pressure in the near term though pressure may be easing significantly by the second half of 2022 as markets achieve a better balance.
The Toronto Dominion Bank is forecasting a 7 percent increase in home prices this year and suggests “another strong year for price growth is in the cards for 2022.”
The Canadian Imperial Bank of Commerce, however, cautions that home sales could plunge in 2022 and condos may be the only sector to see price growth. Overall, they expect sales to fall by 15 percent in 2022, relative to the elevated level seen in 2021—an environment that is consistent with a notable deceleration in home price inflation next year. It’s also an environment that is also likely to impact the relative value of condos vs. single-detached units. Logic suggests that higher rates will channel more activity into the more affordable condo market, resulting in relative price outperformance in that market, they predict.
The Canadian Real Estate Association (CREA) forecasts home sales will moderate in 2023, but prices will remain high and accelerate into 2022 due to a lack of supply.
While interest and mortgage rates are expected to rise, the forecast suggests the desire for home ownership will stay strong and lack of available properties will mean rising prices.
CREA projected that the national average home price will have risen by 21.2 percent on an annual basis to $687,500 by the end of 2021, and predicts the national average home price will rise by 7.6 percent on an annual basis to around $739,500 in 2022. It warned the forecast was “conservative” because in November 2021 the national average price was almost $721,000. Highest prices in 2022 will be seen in B.C. and Ontario, where it predicts average home prices to reach $990,038 and $971,080 respectively.
In Quebec, homebuilders said the province would hit the highest housing starts in more than three decades in 2021, but expected a sharp, negative correction in 2022. Housing starts across the province were set to reach 68,300 in 2021, a 26 percent leap from 2020, said the Association des professionnels de la construction et de l’habitation du Québec (APCHQ). The best performance since 1987, and third-highest total on record.
New home prices in Quebec climbed 20 percent on average in the past year, residential construction is expected to slow over the next 12 months. The APCHQ expects the price hikes to cool home buying, especially first-time buyers. However, continued rapid price hikes could also attract more investors into the housing market.
Quebec housing starts are forecast to drop about 18 percent to 56,000 in 2022, their first decline in seven years, APCHQ predicts. Fifteen of Quebec’s 17 administrative regions are expected to post declines.
In Greater Montreal housing starts are expected to reach 33,500 this year, the highest level in at least 30 years, according to APCHQ data. Next year’s tally should come in around 27,000 units, a 19 percent decrease, APCHQ said. The projected construction slowdown means Quebec’s housing deficit will probably endure for several more years. Some 40,000 to 60,000 housing units were missing at the end of 2020 to restore balance to the province’s residential property market, the APCHQ stated in a recent report.
