Weyerhaeuser Co. began the REIT’s Q2 earnings call by diving into the housing market. Firm CEO Devin Stockfish said that outside of the Pacific Northwest, the second quarter was extremely wet with record setting precipitation constrained building activity in key areas across the country.
“Housing starts in most regions, increased modestly quarter-over-quarter, despite the unusual weather and second quarter, housing starts totaled $126 million on a seasonally adjusted basis compared with $1.2 million in the first quarter, he said. “However, housing starts in the south, which account for roughly half of U.S. homebuilding activity, declined on a seasonally adjusted basis as build our struggle to navigate flooding in near historic levels of rainfall.”
In addition to the weather related challenges during the first half of 2019, he said that the industry continues to face many of the same supply side constraints that have been headwinds for housing over the last several years, namely affordability, regulatory burdens and labor and lot availability.
“While these constraints continue to affect the housing market, we believe the fundamentals support modest growth for 2019. In particular, mortgage applications for purchase are up over 6% in the first half of 2019 versus the same period in 2018,” he said. “New home sales are up 2% year-to-date, builder sentiment remains strong, economic data remains positive with increasing real wages, unemployment below 4% and consumer confidence near 15 year highs. And affordability has improved as mortgage rates have declined.”
He explained that “our builder customers are optimistic that they will be able to return to a more normal pace of building activity in the third quarter and they continue to hope for catch up activity in the fourth quarter, weather permitting. We also expect builders will continue to adjust product offerings as they seek to meet solid and growing underlying demand for affordable housing.”