Projecting Housing Starts and Softwood Lumber Consumption in the United States

• Published in: Forest science Vol. 64; no. 1; pp. 1 - 14
• Main Authors: Prestemon, Jeffrey P, Wear, David N, Abt, Karen L, Abt, Robert C
• Format: Journal Article
• Language: English
• Published: US Oxford University Press 02.02.2018
• Subjects: Censuses; Central banks; Computer simulation; Construction; Construction industry; Consumer Price Index; Consumption; Datasets; Determinants; Economic growth; Economic models; GDP; Goodness of fit; Gross Domestic Product; Housing; Housing prices; Housing starts; Interest rates; Lumber; Median (statistics); Recessions; Residential areas; Residential buildings; Statistical analysis; Statistical tests; Tax rates; Wood; Wood products; United States > US; econometrics; Monte Carlo; lumber consumption; construction activity
• ISSN: 0015-749X; 1938-3738
• DOI: 10.5849/FS-2017-020

Abstract New residential construction is a primary user of wood products in the United States; therefore, wood products projections require understanding the determinants of housing starts. We model quarterly US total, single-family, and multifamily housing starts with several model specifications, using data from 1979 to 2008, and evaluate their fit out of sample, 2009–14. Goodness-of-fit statistics show that parsimonious models outperform general models in out-of-sample predictions. Monte Carlo simulations of total housing starts to 2070 project median starts ranging from 0.86 million/year at 0% real gross domestic product (GDP) growth to 1.91 million/year at 5% real growth, with 90% uncertainty bounds ranging from 0.52 to 2.13 million/year. Assuming that future GDP growth equals the average rate observed over 1990–2015, there is less than 9% probability that housing starts will exceed 2.0 million in any given year, 2016–35. Results show no evidence of structural change in the determinants of total or single-family housing starts coincident with the recession of 2007–09. Using these housing projections in a softwood lumber consumption model shows that GDP growth slower than 2% is consistent with stagnant or declining median softwood lumber consumption.