The small but positive uptick in the economy and residential construction closed 2012 on an optimistic note for the first time since the recession began, and that slow-but-steady growth is expected to continue through 2013. With indicators pointing to rising housing starts through the year and into 2014, APA-The Engineered Wood Association predicts a second straight year of growth in all four of the wood product sectors it represents.
"Last year saw across-the-board increases in structural panels, I-joists, glulam, and LVL. In 2013, not only will that trend continue, but at a slightly faster pace in most cases," said Craig Adair, APA's market research director. "Residential construction will drive much of that growth, with pent-up demand for housing, moderately rising home prices, and growing consumer confidence having the most influence."
Residential Market Forecasts
Housing is beginning to lead the economy and is expected to provide an economic catalyst for years to come. The residential market is gaining strength from a very low bottom, and interest rates are still low. While housing is not immune from potential tax increases and government spending cuts, momentum is favorable for a healthy increase in starts.
APA is forecasting single-family housing starts to reach 665,000, a 24% gain, as homeowners take a positive view toward purchasing a home, the job market improves, and home prices firm up in many cities. Multifamily starts are expected to improve 35% to 330,000 units.
The remodeling market is also showing small signs of life, although the outlook is brighter into the second half of 2013 and in years following. The NAHB's Remodeling Market Index is above 50 for the first time since 2005, meaning that more remodelers expect business to be higher or better in the future than lower. The Harvard Joint Center for Housing Studies predicts repair and remodeling expenditures to reach 2007 levels, around $145 billion, a dramatic improvement over 2008-2012 levels.
Non-residential, Industrial, & Exports
Non-residential's mild 3% uptick in starts in 2012 is expected to be repeated in 2013; school construction and healthcare will lead in total square footage, although the education sector will experience a small decline. Collectively, non-residential starts are expected to recover to more than 1 billion square feet within the next four years.
The industrial market will see only modest growth in 2013 due to a number of factors, from government budget cuts that impact manufacturing to the millwork industry's dependence on remodeling as well as nonresidential construction. Overall, manufacturing is expected to grow about 2% this year, down from 4% in 2012; improvement to 5% growth is anticipated in 2014.
Finally, indicators point to U.S. structural panel manufacturers exporting about the same quantity of material in 2013 as in 2012.
Wood Products Expectations
Wood products demand is expected to accelerate as rapid housing growth is followed by renewed repair and remodeling energy, an upturn in the nonresidential construction cycle, and industrial demand that increases with consumer spending and higher GDP growth.
Domestic (U.S. and Canada) production of OSB and plywood is expected to reach 30.5 billion square feet in 2013, a 10% rise over 2012.
Glulam is predicted to see a 10% increase over 2012, reaching 248 million board feet. The growth is due entirely to housing, with little support from non-residential.
Growth in the I-joist market is forecast around 17% in 2013 to 651 million linear feet, slightly slower than 2012's 22% increase. Most of the gains will come from housing, with raised-floor construction continuing to provide a notable boost.
Increased housing starts also will drive demand for LVL, the majority of which is used for beams, headers, and rimboard. LVL production should reach 54.9 million cubic feet in 2013, a 10% growth over 2012.
For additional details, APA's Yearbook, which contains historical data and a look at 2013, is available to non-members for $250 through www.apawood.org.