As we move into 2024, some signs are on the horizon that the New Year may bring better business to our hardwood customers. The stock market is pointing towards some interest rate relief over the year, with several analysts forecasting up to 125 basis point adjustment (1-1/4%) over 2024. As of the end of November 2023, the S&P 500 has posted a total return of about 21% for the year, well above its average annual return of around 10%. The tech-heavy Nasdaq Composite has gained around 37% in 2023. The blue-chip Dow Jones Industrial Average is up about 11% yearly.
Heading into last year, investors expected more difficulty for the stock and bond markets after the 2022 bloodletting. The stock market’s outlook seemed dicey; the Federal Reserve continued its unprecedented series of interest rate increases, and most investors felt that “the most-advertised recession in history” was just months away. Even those in the more optimistic camp felt we would see mid-single-digit gains at best by year-end. Instead, 2023 became one of the biggest years for stock market performance in the past decade, with the Morningstar US Market Index up 26.4%. With markets ending the year on an up note, this should buoy consumer confidence in homebuying, remodeling, and furniture purchases, all sectors that have seen less-than-stellar activity through a tough 2023.
In today’s USA Today, Robert Dietz, the chief economist for the National Association of Home Builders, forecasts a gain for single-family housing construction starting in 2024. This will be the first year of increase after declines in 2022 and 2023. Dietz said, “Due to low existing inventory, new construction has increased to approximately one-third of total single-family inventory in recent months when historically it was only 10% to 15%,” Dietz says. The same article also noted that the level of remodeling activity will be approximately flat in 2024 compared to 2023. The housing stock is aging and requires reinvestment (the typical home in the U.S. is nearly 40 years old).
Closer to home, I spent the holidays with a daughter in the land development business. While her company operates nationally, it primarily focuses on the South and Southeast. Her company invests in land acquisition and development to sell finished single-family residential lots to homebuilders. They have seen a sharp upturn in builders moving to buy lots to start homes in 2024 as builder confidence has rebounded.
Most experts predict the average 30-year mortgage rate to linger between 6.1% to 7% range in the first quarter, then decline throughout the year. Daryl Fairweather, chief economist for Redfin, said, “Mortgage rates are likely to remain well above pandemic-era record lows because financial markets increasingly believe the country will avoid a recession in 2024,” says Redfin Chief Economist Daryl Fairweather. “Mortgage rates will fall to about 6.6% by the end of 2024. The gradual decline in rates combined with the small dip in prices will bring homebuyers some much-needed relief.”
At Cascade, we are positioned to supply these markets due to significant capital investments, allowing us to make more volume than before and more of the grades in demand in the North American market. In addition, our Emerald Wood Marketing Alliance with Murphy Plywood is set to alleviate the persistent supply shortages in Alder Plywood in January. And we are not sitting still. We anticipate bringing several other products to market in early 2024 that we think will revolutionize our offerings to meet this demand.
