Engineered wood demand bodes well for housing

Industry group predicts 15 percent rise in US housing starts this year

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Jun. 8, 2012

Share this Story:

Industry group predicts 15 percent rise in US housing starts this year

Steve Bergsman
Inman News®

Trying to predict the health of the new housing market is a bit confusing due to the wealth of data that is thrown out to the media. Every group seems to do its own research, and while the predictions are all in the realm of each other, there is always a slight difference.

I also tend to make matters worse for myself because I'm always looking for a new, out-of-the-box source that can be used to ascertain what's happening in the world of new housing.

Lately, I've been looking at the research done by APA -- The Engineered Wood Association. Its estimates are not much different from the pure research organizations, but I tend to give them a little more credence because that industry is heavily dependent on single-family construction, and too much or too little production based on faulty research is not healthy for corporate organizations.

According to the latest numbers from the Census Bureau, privately owned housing starts in April were at a seasonally adjusted annual rate of 717,000, which was 2.6 percent above the revised March estimate of 699,000 and 29.9 percent above the revised April 2011 rate of 552,000.

Single-family housing starts in April were at a rate of 492,000, which was 2.3 percent above the revised March figure of 481,000. The April rate for units in buildings with five units or more was 217,000.

At the end of last year, McGraw-Hill Construction predicted single-family housing in 2012 would improve 10 percent in dollars, corresponding to a 7 percent increase in the number of units to 435,000. Multifamily, it predicted, would rise 18 percent in dollars and 17 percent in units.

At first glance, a report from APA-The Engineered Wood Association looks like something from another language. After all, how many of us know what glulam timber is, or I-joists, or even what the phrase "engineered wood" actually means?

All these wood products are important to the construction of a new house, so when APA (formerly the American Plywood Association) issues an optimistic report on production, one should pay attention, because engineered wood estimates are based on the organization's own housing-start research.

To begin, engineered wood is a composite, or man-made wood, often in products called softwood, plywood, oriented strand board (OSB), glulam (glued-laminated timber), I-joists (for heavy loads) and laminated veneer lumber.

Plywood and OSB together make up the structural panels segment of the market, which today is 35 percent dependent on new single-family housing. Glulam beams, I-joists and laminated lumber lumped together are about 60 percent dependent on new single-family housing.

So, let's see what's up with these wood products.

Demand for and production of North American (United States and Canada) structural panels is expected to increase 7 percent to 28 billion square feet in 2012, APA reports. Glulam timber should see a 5 percent production boost from 2011 and hit 213 million board feet in 2012.

Also experiencing growth, according to APA, are I-joists, which should capture 11 percent more market share from the category's 2011 level. Finally, laminated veneer lumber, or LVL, should expect to see a 4 percent increase in production, reaching 43.4 million cubic feet for 2012.

"There is a little more life to engineered wood demand this year," said Craig Adair, APA market research director. "Last year we were just treading water. This year, we're expecting demand to pick up from 4 percent to 11 percent depending on the product."

Adair cautions that his organization's expectations for production are based on the APA's predictions for new-home construction. According to APA, housing starts in the United States totaled 609,000 last year, and totaled 194,000 in Canada. Estimates for 2012 by the APA are 700,000 housing starts in the United States (up 15 percent) and 85,000 in Canada (down 5 percent).

(APA looks at the United States and Canada together because Canadian product feeds into the United States.)

Whether the estimates for engineered wood product or new-home sales came first, it doesn't make much of a difference because one tracks so closely to the other. For example, a recent history of engineered wood production reflects on what happened to the real estate markets over the past 10 years.

Page: 1 2 |Next
Add to favoritesAdd to Favorites PrintPrint Send to friendSend to Friend

COMMENTS

ADD COMMENT

Rate:
(HTML and URLs prohibited)