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Forisk Forecast: US Housing Starts Outlook, Q4 2016 Update

This is the first in a series related to Forisk’s Q4 2016 forest industry analysis and timber price forecasts for the United States and Canada.

Each quarter, when updating models for the Forisk Research Quarterly (FRQ), we revisit prior projections and review applied research on business and economic forecasting. Forisk’s Housing Starts Outlook combines independent forecasts from professionals in the housing industry. Currently, these include Fannie Mae, Freddie Mac, the National Association of Home Builders (NAHB), The Conference Board, and Wells Fargo. Forisk applies long-term assumptions from the U.S. Energy Information Administration (EIA) in establishing the peak and trend over the next ten years (Figure).

Despite total housing starts in September declining 9.0% from August on a seasonally adjusted annual rate (SAAR), single-family housing starts increased 8.1% (SAAR). Alternately, multifamily starts declined 38.9% (SAAR). While steep, this continued a “reversion to the mean”, or return to average levels for multifamily homes. In 2015, single-family starts represented 64.3% of total housing starts, the lowest rate since 1985 and well below the ten-year average of 72.6%.

By being more labor intensive and consuming more wood per unit of housing, single-family construction provides a greater impact on economic growth than multifamily units. New single-family homes accounted for approximately 24% of total sawnwood and 33% of total structural panel consumption. In comparison, according to research by James Howard and David McKeever at the USDA Forest Products Laboratory (2015 Research Note, FPL-RP-0336), multifamily construction represented 5% of total consumption of both the aforementioned products.


Overall, Forisk projects 2016 housing starts of 1.17 million, up 5.3% from 2015 actuals. Forisk’s 2016 Base Case peaks at 1.55 million housing starts in 2021 before returning to a long-term trend approaching 1.50 million. For comparison, our October 2015 Base Case one year ago peaked at 1.56 million housing starts in 2020.

Forisk analyst Andrew Copley supported the research for this post. To learn more about the Forisk Research Quarterly (FRQ), click here or call Forisk at 770.725.8447.


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