As we head towards winter, contacts are ramping up as best they can under the challenging period we are going through. Government announced cuts to their budget spending of $15 billion, and consumers are reigning in their spending as well due to higher interest rates, and home prices are still high, therefore those who would like to buy are holding off doing so. With the devastation of forest fires across the country throughout late spring and into early fall, it has affected the availability of logs and lumber, and trying to make a profit is not easy to come by for many businesses.
For the regionally important Hard Maple, prices appear to be trending up for certain grades and thicknesses, and also according to color. Some sawmills were avoiding Hard Maple due to market contractions for this species. Availability of green supplies seem to be sufficient at this time to meet current needs. Kiln-dried supplies were contracting and so buyers ramped up their purchases resulting in prices rising.
Soft Maple sales continue to be elusive with little improvement lately. Sawmills have also cut back on producing this species and so supplies are lower. Some expressed concern there may be shortages for this species over the winter.
Cherry demand remains low both on domestic and international markets. Decent demand from China is sustaining Cherry sales.
For some contacts Ash is doing well, with green Ash production having slightly improved in certain areas. Kiln-dried Ash is seeing interest from China. On the domestic front demand is fair but not robust.
Basswood supplies are still outpacing demand, although since production was reduced in many areas, current supplies have lessened thus reducing its quantity on the marketplace. Kiln dried products are available, noted contacts.
Some flooring producers have reduced their purchase of Hickory and Oak as the housing market in Canada and the U.S. has slowed. New home construction figures are down in Canada as interest rates for mortgages have gone up in the past year. There is competition from plywood producers who are purchasing higher quality grade White Oak logs, thus flooring plants and sawmills are struggling to get adequate supplies. Also, a host of different floor coverings are vying with Hardwood flooring products’ market share. On the other hand, some flooring manufacturers in the residential and truck trailer sectors have been buying Nos. 2A and 3A Red and White Oak as business is improved slightly.
According to housing market forecasts, higher interest rates continue to cool Canada’s housing market following the solid rebound in spring. August marked the second-straight month home resales dipped (down 4.1 percent from July) and home price gains moderated. Earlier tight demand-supply conditions eased further as the number of homes put up for sale rose again slightly. Most local markets have sharply rebalanced by now. RBC thinks the cooling trend will extend into the fall despite the Bank of Canada (BoC) pausing its rate hike campaign.
Activity in home resales in Quebec hit a soft patch. Month-over-month sales activity contracted across all comparative market analysis (CMAs) except Trois-Rivières.
On the supply-demand side, most markets in British Columbia, Ontario, and parts of Quebec and Atlantic Canada are in balance territory.
Balanced conditions are lessening the degree of competition between buyers, which helps pin down price escalation. Canada’s MLS Home Price Index (HPI) rose at the slowest pace in five months in August, up just 0.4 percent from July. That’s less than a quarter the average rate of 1.8 recorded between April and June.
Still, prices have now moved above year-ago levels. The national MLS HPI was up 0.4 percent y/y in August. Halifax (+9.5 percent), Calgary (+7.3 percent) and Quebec City (+6.4 percent) lead the country among larger markets on that front.
It is forecast that Canada’s housing market will likely stay relatively calm in the months ahead. High interest rates and homeownership costs are expected to continue to be above budget lines for many potential buyers, and a looming economic downturn is set to undermine buyer confidence. The same factors could also potentially strain existing homeowners – forcing some to list their property. It is felt a more balanced market will keep the pace of future price gains muted, with slight declines not being ruled out.
Thus, the Hardwood industry could feel the pinch more in the coming year, as they face challenging economic conditions, with a lower housing market due to consumers trying to reduce their spending, or struggling to get into a tight housing market, thus lowering their demand for finished Hardwood products and supplies.
(Editor’s note: all financial and economic data reported in this article represent the most current data available at the time of this writing.)