Contacts recently said business had dropped slightly to the U.S. as had demand on the domestic front with higher production continuing to erode prices for many species of Hardwoods.
The regionally important Hard Maple has seen an abundance of this species on the market, and so end users and wholesalers had ample kiln-dried Hard Maple to offer. Most don’t need more inventory as they are either not buying at any price or are waiting for prices to go down further. Established customers are having no trouble finding green Hard Maple, even though it is purchased from the sawmill in smaller quantities, and at a reduced price, which is to their advantage.
Soft Maple supply on markets is high compared to what wholesalers and end users can absorb. Sawmill operators are having to go further to get customers, and sometimes this means accepting lower prices. Some contacts noted that, recently, kiln-dried inventories were climbing at many sales operations, which was prompting further cuts.
Production of Ash has contracted due to the Emerald Ash Borer, especially through the Appalachian region, there is still enough green Ash being produced to meet market demand. Prices are trending down, however, for FAS&1F and through No. 1 Common and No. 2A grades. Exports to the Far East have slowed as well comment contacts, especially for the common grades. Domestic demand for this species is weak.
Demand for Basswood continues to be good, reported sawmill operators. Wholesalers and end users are using or reselling steady quantities of kiln-dried Basswood, but purchases are being reduced to control inventories. They said competition for orders has increased and prices are losing ground.
Cherry has become a niche species in the U.S. and Canada, which was once used in a variety of applications in homes and commercial buildings. Some end users have substituted Cherry in painted applications instead of using Whitewoods like Hard and Soft Maple when their prices had soared. This substitution has abated since prices for Whitewoods have gone down. Contacts indicated exports to China are fair. Kiln-dried prices have declined for most grades and thicknesses.
Hickory was a strong seller for the past 18 months, but demand dropped recently, although less than for most other species. The cabinet, residential wood flooring, moulding and millwork and furniture manufacturers filled their supplies over the past several months and have less of an urgency to purchase more. Green and kiln-dried prices eased lower the past few months.
Some residential wood flooring producers are having difficulty moving Oak strip flooring. White Oak appears to be drawing more interest than Red Oak. The push is to obtain White Oak lumber at a steady pace while reeling in Red Oak receipts. According to areas contacted, some sawmill operators are struggling to move developing green production as drying operations, flooring manufacturers and other end users are not in the market for this species, or are buying very cautiously. Thus, prices are lower for most grades and thicknesses for Red Oak.
Poplar demand continues to be good in Canada and the U.S. comment contacts, but exports elsewhere appear to be low, especially for No. 1 Common and No. 2A. Sawmills have not slowed their production of this species, thus an excess over buyers’ needs.
Contacts noted that Walnut sales are flat to somewhat slower in domestic markets and weak for export sales. They added that green production continues to outpace demand, with prices subject to pressure.
The Bank of Canada’s rate hikes is evident on the housing market, as Canadian housing prices dropped by the largest degree on record on a monthly basis notes the Royal Bank of Canada (RBC) in its Monthly Housing Market Update. Many home buyers are taking a step back from the real estate market.
The current softness is concentrated in Ontario and British Columbia, though it is increasingly spreading to Quebec and parts of Atlantic Canada.
Despite the widespread depreciation since spring, property values (as measured by the MLS HPI) are still above year-ago levels virtually everywhere in the country. Only Kitchener-Waterloo showed a decline (-1.7 percent) at this stage. In many cases, especially in Atlantic Canada, prices remain significantly richer.
The likelihood the Bank of Canada will continue raising rates by year-end is poised to keep buyers on the defensive in the coming months, notes RBC. Higher interest rates will disqualify more buyers from obtaining a mortgage and shrink the size of a mortgage others can qualify for. RBC predicts home resales to fall 23 percent in Canada this year and a further 15 percent next year.
RBC feels the market will adjust to higher interest rates by early 2023. Any recovery will likely take a few months to tighten demand-supply conditions, placing the bottom for prices around spring time (overall for Canada). RBC expects benchmark prices to be down approximately 14 percent from the recent peak nationwide. On a provincial basis, they project Ontario and B.C. to record the largest peak-to-trough declines at -16 percent and place Alberta and Saskatchewan at the other end of the scale at -4 percent.
The Canadian Real Estate Association (CREA) cut its forecast for home sales in 2022 and also lowered its expectations for price increases, but hints the bottom may have already been reached. In its latest housing market outlook, CREA expects the Canadian multiple listing service this year to be down 20 percent from the 2021 annual record. They forecast the national average home price to rise by 4.7 percent to $720,255.
The outlook is down from CREA’s June 2022 forecast that predicted a 14.7 percent decline in sales this year and a 10.8 percent increase in the national average home price. This updated forecast came as CREA says home sales in August were down 1 percent compared with July 2022 and 24.7 percent lower than August 2021.
The national average home price was $637,673 in August, down 3.9 percent from August 2021.
The rate hikes quelled unruly bidding wars seen in many markets over the winter and are encouraging prospective buyers to wait for greater price drops. Some buyers may choose to stay on the sidelines until there are clearer signs of borrowing costs and stabilizing prices.
This is having an effect on the Hardwood industry as Canadians reign in their spending as they wait to see what interest rates will be heading into 2023, home prices, and also deal with the rising cost of living.