Following our article in the Hardwood Review last month (here), hardwood grade lumber price indices have trended in line with our forecast, as both the U.S. monetary base and the Yuan-USD exchange rate continue their general decline since early 2022. Although hardwood markets ultimately respond to supply and demand forces, historical trends indicate monetary policy has an influence on pricing, over time, due to China being the #1 export destination for U.S. hardwood lumber.
U.S. single-family housing starts tend to exert a more direct influence on U.S. hardwood grade lumber prices, as shown below.
Single-family residential construction trends are more closely correlated with hardwood demand because they generally utilize more hardwood trim, flooring, cabinets and hardwood furniture than multi-family construction. Starts have continued to trend upward since the Great Recession, despite a few monthly fluctuations, as shown below. During the past few months, new single-family starts have improved considerably, relative to 2022 year-end.
Single-family starts and completions trend with one another, over the long-term, as shown below, despite some month-to-month variability. The mid-2023 flattening in single-family housing completions – to some extent – is a result of the drop in starts earlier this year. Now that single-family starts have regained some of their previous momentum, watch for completions to continue a relatively stable pace in the near term.
Below, the hardwood grade lumber index price is illustrated alongside a) the U.S. consumer price index (all items); and b) average hourly earnings (all private employers) during the same timeframe. According to the U.S. Bureau of Labor Statistics, average hourly earnings have risen slightly faster than the consumer price index since 2010, as shown below.
Interestingly, the broader stock U.S. market has continued to see price growth since January, despite the slow reduction in the U.S. monetary base this year. Over the longer historical term, readers will note the correlation between expansion of the U.S. monetary base and the broader stock market, despite some short-term departures. Over the next several months, we expect hardwood markets to continue at their current levels of price and demand for a host of factors. For customized valuation and advice related to your unique forest property, our FORECON team invites you to contact us today.
