Housing starts rise linked to home building permits pushing timber production

Dave Masko's picture

COOS BAY, Ore. – Cargo ships loaded with freshly cut timber are a sign of recovery, say mill workers pointing to a rise in permits for homebuilding last month.

Permits for homebuilding “neared a 3.5-year high in February, suggesting a budding recovery in the housing market was still on track even though groundbreaking activity slipped,” reported Reuters and other wire services this week. Reuters also pointed to a March 20 report from the U.S. Commerce Department stating “new building permits surged 5.1 percent to a seasonally adjusted annual rate of 717,000 units last month.” In turn, a local Coos Bay mill worker told Huliq during a March 20 interview that “it waters your eyes to see that much timber being loaded on those cargo ships;" while cargo ship after cargo ship seemed filled to the brim during a recent busy week at the International Port of Coos Bay. In turn, this Port is dubbed “the largest deep-draft coastal harbor between San Francisco and Washington State’s Puget Sound.” The Port’s fact sheet also states that “an average of 2.5 million tons of cargo moves through the Port of Coos Bay, which is Oregon’s second busiest maritime commerce center.”

Permits for homebuilding rise near 3.5-year high

The jump in building permits, which Reuters reported March 20 - “exceeded economists' expectations for an advance to a 690,000-unit pace" - and also reinforced views "the housing market was improving and that home building would add to economic growth this year for the first time since 2005.”

"The data provides further evidence of a rebound in housing activity. Housing is being nursed back to health, but getting out of rehab takes time," said Eric Green, chief economist at TD Securities in New York.

While Reuters reported how “green shoots are emerging in the housing market,” the wire service also noted how “an oversupply of unsold homes is depressing prices and starts are still less than a third of the 2.27 million rate peak reached in January 2006. In February, housing starts slipped 1.1 percent to a rate of 698,000 units, but there was more new construction activity in January than previously reported. Moreover, starts were up 34.7 percent from February last year, the biggest year-on-year rise since April 2010.”

Moreover, the reported noted how “construction of single-family homes - the lion's share of the market -- dropped 9.9 percent last month, but groundbreaking for multi-family housing projects soared 21.1 percent. Over the past year, starts on single-family homes have risen 17.8 percent, while multi-family starts have nearly doubled as demand for rental properties have risen, with many Americans moving away from homeownership.”

Rise in Oregon timber cutting points to housing comeback

According to oregon.gov, and its “Oregon Business Development Department’s” overview of the state’s timber industry, any rise in home building is good news for the state’s wood processing.

In fact, wood process “is one of Oregon's most important manufacturing activities,” states Oregon’s Business Development Department’s fact sheet; while also explaining how “almost half of the state is forested, making Oregon one of the leading suppliers of wood and wood products worldwide.

Also, the fact sheet notes how the majority of the trees processed are “Douglas Fir, Sitka Spruce and Ponderosa Pine. Oregonians try to harvest with care so that the forests' other great benefits such as watershed protection, fish and wildlife habitat, recreation and shade may be preserved.”

Oregon's total land area is 61.4 million acres, and almost half of this, 27.5 million acres, is forested, states oregon.gov.

While the March 20 Reuter’s report noted how “home building now accounts for only about 2.5 percent of gross domestic product,” the wire service also noted how “it remains a major force in the economy.”

For instance, economists estimate that for every one house built, about 2.5 jobs are created.

At the same time, Reuters reported how “permits last month were boosted by a 4.9 percent rise in approvals for single-family home projects to their highest level since April 2010. It was the fifth straight month that building permits for single-family homes had increased. Permits usually lead home construction by about a month, meaning that starts will likely reverse their slide in March. Permits for multi-family homes rose 5.6 percent to a 245,000-unit rate.”

"Builders are not just spending money on permits unless they absolutely intend to use them. We will see housing starts above 700,000 units next month," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania, in the Reuters report.

"We are likely to see as much as a 20 percent increase in housing starts this year compared to last year. That is a healthy gain and it's going to add lots to jobs and lots to GDP and that's all that really matters," Naroff added.

Building houses is good sign for weak economy

The good news that timber is being cut again on par with levels before the recent recession is “just what we’ve been waiting for,” explained a Coos Bay mill worker, while busy loading logs with a forklift in this coastal international sea port March 20. In turn, msn.com reported how America’s home builders “are betting that the housing market is finally on the path back to health.”

For instance, msn.com reported how these home builders “requested 5 percent more permits in February to build single-family homes and apartments in the coming months.”

In turn, “that increased the annual rate to a seasonally adjusted 717,000 permits,” the Commerce Department said March 20.

While that's still half the rate considered healthy by most economists, it's the highest since October 2008.

"This report is one of the more encouraging new construction reports we have seen in the last four years," said Patrick Newport, an economist with IHS Global Insight.

Also, msn.com reported how “builders have grown more confident over the past six months after seeing more people express interest in buying a home. The rise in permits suggests builders see that interest translating into sales over the next 12 months. That's how long it typically takes to build a home after a permit is obtained.”

Image source of massive amounts of freshly cut timber being loaded onto a cargo ship in the International Port of Coos Bay, Oregon, March 20. Photo by Dave Masko

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