David Chertudi, Lead Economist
U.S. Economy and Housing Market. The U.S. economy continues to improve, albeit it slowly. The unemployment rate, which peaked at 10.0 percent in October 2009, is down to 7.3 percent as of August. GDP growth remains modest at below two percent over the last four quarters ending in June. The housing market continues to show positive signs: new housing starts in the first seven months of 2013 averaged 912,000 (seasonally adjusted annual rate) and average U.S. housing prices have increased in each of the last 12 months through June. The U.S. economy still faces significant challenges. There are still too many unemployed workers, though some reentered the workforce after having left; the financial and economic crises in Europe are improving, but several European countries remain in recession; China’s economy has slowed; and the U.S. government has still not implemented a coherent, growth-driven economic policy.
Lumber and Log Prices. Lumber and log prices are up in 2013. The Random Lengths’ Coast Dry Random and Stud composite lumber price hit $414/mbf in April 2013, an impressive 44 percent year-over-year increase, before falling off steeply to $322/mbf in June. Predicted by forest economists, this drop was due to the uneven response of bringing lumber production back online and is interpreted as a temporary setback and not the beginning of a long-term downward price trend. There will be considerable price volatility moving forward. Pacific Northwest log prices have also moved up sharply after being fairly flat for 2011 and most all of 2012. The price for a ‘typical’ DNR log delivered to the mill climbed dramatically to a nominal high of $587/mbf in April, the highest price since 2000. The log price has fallen off a bit in August to $564/mbf, mimicking the recent drop in lumber prices.
Timber Sales Prices. The FY 2014 average sales price is now predicted to be about $340/mbf, down about nine percent from the $375/mbf predicted in June. Weighted by volume, sales prices have averaged $246/mbf in the first two months of the fiscal year. The lowered price expectations for this year are due primarily to higher proportion of thinning sales than previously anticipated. Based on continued confidence in a genuine recovery in the U.S. housing market, future timber sales prices are still estimated to be about $408/mbf in FY 2015, $412/mbf in FY 2016, and $416/mbf in FY 2017.