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Forisk Forecast: Updated 2014 US Housing Starts Outlook

This is the first in a series related to Forisk’s 2014 mid-year forecast of timber prices in the United States.

“Nothing to be done,” wrote playwright Samuel Beckett for the opening of Waiting for Godot.  Indeed, that line captures our feeling as we await a meaningful resurgence in housing starts. And we care because, in the timber industry, increased home building leads to growing demand for lumber and other building products and, ultimately, periods of strengthened stumpage prices.

Each six months, when updating our Forisk Forecast timber models for the US, we review prior projections and study research on forecasting to apply lessons learned.  For example, the literature on combining forecasts informs Forisk’s approach to establishing baseline assumptions for macroeconomic factors.  Forisk’s Housing Starts Outlook combines independent forecasts from professionals in the housing industry.  As of August 2014, these include Fannie Mae, Freddie Mac, Mesirow Financial, the National Association of Home Builders (NAHB), The Conference Board, and Wells Fargo, as well as long-term assumptions from the Energy Information Administration (EIA) (Figure 1).

20140903 Forecast Housing figure

Forisk’s updated 2014 Base Case peaks at 1.58 million housing starts in 2019.  For comparison, our February 2014 Base Case peaked at 1.63 million housing starts in 2019.  Overall, housing has slowed, with projected totals for 2014 dropping 9% from 1.1 million to 1.0 million.

The reduced projections for housing starts in 2014 reflect adjustments across housing economists. Of the individual housing forecasters tracked by Forisk, Freddie Mac made the most substantive adjustments, dropping projected starts by 11.3% (130K) for 2014 relative to expectations as of February 2014.  The Conference Board and Mesirow Financial made the most modest adjustments, reducing projected housing starts by 7.3% (80K) and 7.5% (80K) relative to expectations as of February 2014.

To learn more about the 2014 Mid-Year Forisk Forecast or Forisk’s market-specific forecasts of stumpage (timber) and delivered wood prices for individual wood-using facilities or timberland ownerships in the US, contact Brooks Mendell at bmendell@forisk.com, 770.725.8447. 

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