From Executive Vice President
Momentum:
I
Impressed? Don’t be. I have just recited the only thing I can remember from my high school physics class. So what does this have to do with forestry? Not much when it comes to growing trees, but it has everything to do with the forces that drive the markets that create the demand for those trees and drive the prices for those products. Over the last several years, those of us who are a part of the forest products industry have been looking for the proverbial light at the end of the tunnel signaling the end to one of the worst slumps our industry has experienced. The wood products sector has suffered the most due to a precipitous drop in building, especially of new homes. Beginning in 2011, some economists pointed to signs that they said signaled the housing market had bottomed out and was on its way up. Like a thirsty traveler seeing a distant desert oasis, the predictions offered a faint hope of relief but most remained discouraged by the distance left to travel AND lingering doubt it might yet be a mirage. Fast forward to today. Not only have we closed the distance, but there are more and more signs that relief is at hand. Consider the following signs as reported by Industry Intelligence Inc. at www. industryintel.com:
A L A B A M A F O R E S TS | S p r i n g 2 0 1 3
“A quantity expressing the motion of a system equal to the product of the vector sum of the products of mass and velocity of each particle in the system”
● “US building permits rise 1.8% in January from December, 35.2% year-overyear to seasonally adjusted annual rate of 925,000; housing starts fall 8.5% from December, rise 23.6% from a year ago to seasonally adjusted annual rate of 890,000: Commerce Dept.” (US Department of Commerce 2/20/13) ● “Sales of new US singlefamily homes in January up 15.6% from December 2012, rose 28.9% from year ago to seasonally adjusted annual rate of 437,000; median sales price of new homes was US$226,400” (US Department of Commerce 2/26/13) ● “US sales of previously occupied homes rise 0.4% in January from December, 9.1% year-over-year to seasonally adjusted annual rate of 4.92 million; falling inventory creating seller’s market in much of country: NAR” (National Association of Realtors 2/21/13) ● “S&P/Case-Shiller Home Price Indices post solid yearly gains in December, with national composite rising 7.3%, 10- and 20-city composites gaining 5.9%, 6.8%, respectively; 19 of 20 MSAs record positive yearly growth” (PR Newswire 2/26/13) ● “US home prices up 6.2% in January from previous
year, with improvements in all 30 of nation’s largest metro areas; on monthly basis, prices rose 0.7% from December 2012, marking 15th consecutive month of increases: Zillow” (PR Newswire 2/22/13) ● “US luxury housing market likely to surge in 2013, driven by increase in number of affluent women,
Chris Isaacson
There are more and more signs that relief is at hand. growth of ultra-luxury consumers who buy homes worth US$10M+, says Coldwell Banker” (PRWeb 2/22/13) So, let’s summarize: Building permits up CHECK Housing starts up CHECK Home sales up CHECK Home prices up CHECK Luxury home market up CHECK Home inventory down CHECK So, are we there yet? Not quite. In fact, Federal Reserve Chairman Ben Bernake sounded a cautionary note in a mid-November speech signaling a continuation of the Fed’s easy money policy. “The housing sector is far from being out of the woods.” (Must have been talking to a forestry crowd!)
Now back to my dissertation on physics. While there remains some uncertainty in the US economic recovery in general and the housing markets in particular, the indicators certainly show there is momentum building and, as my eleventh grade physics teacher Mrs. Jones taught us, the larger the object and the faster it is moving, the more likely it will be to continue on its projected path…even if some forces temporarily work against that motion. Here’s to hoping the laws of physics apply to markets for forest products! ▲
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