Construction Industry Forecasts

Sales of new single-family housing in the United States jumped from 324,000 units in February to 411,000 units in March, according to the latest data set from the U.S. Census Bureau and the Department of Housing and Urban Development. This was a month-to-month increase of 27%.

This is very good news for the U.S. housing sector. Admittedly, part of the explanation may be the imminent expiry of the $8,000 first-time homebuyer tax credit at the end of April. Nevertheless, the industry has needed a shot in the arm and that has been delivered effectively.

Government officials are hoping that continuing low mortgage rates, the improving economy and a gradual pickup in employment and incomes will keep the momentum going beyond the end of this month.

A further wish is that the increase in new home demand will provide a boost to home prices. Stability in home prices, with an expectation of increases over time, is a key ingredient in consumer confidence.

Unsold new homes declined slightly in the month. The combination of fewer unsold homes and more sales meant that the number-of-months inventory dropped to 6.7.

The 6.7 months inventory figure was its lowest level since the start of 2007. It is now only too high by a factor of 50% after being almost three times too high in early 2009.

The improvement in U.S. home sales has positive implications for Canada. It goes along with the improvement in housing starts that is already being seen. On that score, British Columbia traditionally supplies about one-sixth of U.S. lumber requirements.

The price of lumber has been moving up over the past year. Commodity lumber prices now stand 69% higher than at their trough point in March 2009.

Alex Carrick