U.S. Lumber 2008 Outlook Dim as Housing Woes Persist
The deepening crisis in the U.S. housing market and a credit crunch will keep lumber prices in the U.S. under pressure well into 2008, with values already near the lowest levels in 15 years. “You’ve got very weak demand and just a pile of inventory (of homes on the market) to get through before you can get demand for the underlying lumber to pick up down the road,” said Paul Quinn, a paper and forest products analyst at Vancouver-based Salman Partners. “That’s why 2008 is going to be very similar to 2007.” Spot lumber futures at the Chicago Mercantile Exchange tumbled nearly 30% from July to October, but have since recovered somewhat. The closely watched western-pine-fir cash price fell to around $220 per 1,000 board feet in late October which, when adjusted for inflation, was the lowest price on record. U.S. housing starts as of October were running at a 1.229 million-unit annual pace. Meanwhile, sawmills continue to churn out enough wood for starts “somewhere between 1.3 and 1.4 million,” Quinn said. Lumber industry analysts expect the tough market conditions to force more and more mills to pare production or shut down completely, especially at Canadian mills where losses have been more pronounced due to a historically weak U.S. dollar. “The size of the Canadian forest products industry is going to shrink measurably as long as the Canadian dollar stays above par. It just cannot handle that,” he said. “The long-term fundamentals of the industry are good, it’s just that this next year or year-and-a-half is going to be particularly traumatic for the industry.” (www.reuters.com)
Reuters (11/30/07); Karl Plume
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These Relics Could Sink a Sale
Unless owners periodically invest in repairs and upgrades, their homes will fall so far below the standards of current buyers that they become obsolete, and then property value can lie almost entirely with the land. Among relics that could sink a potential sale: only one bathroom, no air conditioning, electrical systems protected by a fuse box instead of a circuit breaker, spiral staircases and basements with only an outside entrance. “Ceilings that look like they’ve been stuccoed” are obsolete, according to Nick Kuhn, an associate broker with McEnearney Associates’ office in Arlington, Va. Most, but not all, date back to the 1960s and 1970s. “Some people are still doing it because it covers up a bunch of cracks,” he said. Also decidedly on his “out” list: dropped ceilings with fluorescent lights and dark beams cutting across the ceiling. On the endangered species list, judging from their absence in current design, are living rooms, formal dining rooms, trash compacters, standard 7-by-9-foot garage doors, wall-to-wall carpet in the main living areas and split-level floor plans. While the split-level isn’t obsolete because large numbers of people are happily living in them today, there aren’t many new ones being built because buyers don’t like the chopped up spaces. Among “pocket watch” features that have been replaced by better technology but remain popular among aficionados, clotheslines are today’s leaders. Neighbors and home owners associations may balk at the look, but the humble clothesline is making a comeback among the environmentally conscious and can’t be beat for making bed sheets crisp and fresh-smelling. (www.washingtonpost.com)
Washington Post (11/25/07); Elizabeth Razzi
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City’s Housing Market Gets Good News
Housing prices in Oklahoma City increased 2.39% in the third quarter, according to the Office of Federal Housing Enterprise Oversight (OFHEO), which was a present surprise for local builders because prices seemed to be trending down at the end of the second quarter and were virtually flat. “Oil is still propping up our economy. Less than a generation ago, but oil is still propping up our economy,” said David Feisal, senior vice president of Tulsa-based SpiritBank and immediate past president of the Oklahoma Mortgage Bankers Association. “The public thinks we’re going to hell in a handbasket. There’s a lot of states that aren’t going to hell in a handbasket,” he said. “I don’t think there’s any question that our house prices are outpacing the country,” he said. The home construction slowdown is partly to thank, said Caleb McCaleb, president of the Central Oklahoma Home Builders Association. “The builders I know have really cut back on starts,” he said. “It’s a supply-and-demand market. A lot of our bankers are saying, ‘Guys, get out there and sell presolds and don’t do so many speculatives.” (www.newsok.com)
Oklahoman (11/30/07); Richard Mize
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Housing Bubble Hasn’t Burst for Valley Just Yet
Home prices in Pennsylvania’s Lehigh Valley continued to rise over the summer and early fall even as many cities in the country saw declines in the cost of houses, according to statistics from OFHEO. Home prices in the area rose 4.4% in the third quarter, which was higher than for the state or the nation, but still marks the Valley’s lowest year-over-year gain in seven years. Over the past five years, homes in the Lehigh Valley have risen in value 63%, according to federal statistics. Low interest rates for mortgages brought many first-time buyers into the housing market, while affluent newcomers fleeing high prices in New York and New Jersey pushed up the average cost of a home in the area. For people who own a home here, the price increases have been good news. What may be their largest asset went up, with prices for an existing home rising 10% or more for the past three blockbuster years. But people who want to buy their first home or trade up to a bigger house are finding that their dollars don’t go as far. A report issued by Lehigh and Northampton counties this year found teachers, policemen and other essential workers are struggling to afford homes in the area. The clearest indication that the Valley’s boom is finished is the 15% drop in the number of homes sold so far this year. That’s compared with last year, when home sales in the area declined for the first time in at least 10 years. (www.mcall.com)
Morning Call (11/20/07); Jeanne Bonner
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Housing Prices Up Across State; Region Does Not Follow Trend
A recently released report from the Wisconsin Realtors® Association found that in the third quarter the state’s housing market was stronger than most other states. “We’re not in the same kind of trouble you read about in other markets around the country,” said Michael Spranger, the association’s chairman. “The fundamental elements of a stable real estate market remain strong in Wisconsin.” While home sales fell in the state by 9.8% in the third quarter over the same period in 2006, median prices rose by 2.4%. “The Wisconsin housing market is far less impacted by the subprime mess than places like California, Nevada, Arizona and Florida, as indicated by foreclosure figures,” said association president William Malkasian. One of the reasons for this, he said, is that fewer Wisconsinites used subprime loans. “Wisconsin has a smaller fraction of its mortgage loans that are subprime than is the case elsewhere, and our foreclosure rate is only about one-third the rate of the nation and far lower than the rate of these problem states,” he said. Spranger noted that the softer housing market might benefit someone looking to buy because of increased inventories of available homes and current low interest rates. “Many communities are seeing increasing inventories which, when combined with the current low interest rate environment, affords many creditworthy first-time buyers the opportunity to get into homes that would otherwise be out of reach,” he said. (www.piercecountyherald.com)
Pierce County Herald (11/30/07); River Town Newspaper Group
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Housing Slump Hurts City Budgets
The housing slowdown is taking a toll on cities across Middle Tennessee, including Spring Hill, which once thrived off money from development but now has to sell off investments to make ends meet. Aldermen voted this week to cash out almost $900,000 in certificates of deposit to help pay the bills, and state auditors are reviewing the Spring Hill’s financial books looking for places to save money as the town grapples with declining revenue from new construction on top of a $3 million budget shortfall from last year. “Probably the biggest worry is that” city officials “will step in and increase taxes to play catch-up, to get us back to where we need to be,” said Spring Hill resident Rufus Wiggins, who runs a local barbershop. Growth allowed Spring Hill to do away with its property tax, with some fanfare, in 2005. Since then, the city has relied almost entirely on government fees and taxes associated with growth. (www.ashlandcitytimes.com)
Tennessean (11/30/07); Jill Cecil Wiersma and Clay Carey
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