16 | Focus on OSB: North America
Above: LP Weatherlogic water-resistant OSB
HIGHER INTEREST RATES IN 2023 LEAD TO LOWER HOUSING STARTS Global benchmark interest rates have substantially risen over the past two years as Central Banks, including the Federal Reserve Bank and the Bank of Canada, use monetary policy to push down inflation. The Federal Reserve Bank steadily raised the Fed Funds Rate to 5.25% through July 2023.
Similarly, the Bank of Canada Bank Rate has remained at 5% since July 2023. A conventional 30-year fixed rate
mortgage in the US peaked at 7.8% in October 2023 and the most common 25- year mortgage (fixed for 5 years) in Canada topped out at 6.5% in November 2023. Mortgage rates have declined since the end of 2023 due to optimism that lower inflation
will soon allow Central Banks to bring down reference interest rates. The current mortgage rate in the US is about 6.7% and in Canada about 5%. Elevated mortgage rates, combined with high home prices, limited housing inventory, and stagnant real incomes, continue to challenge the dream of home ownership. Total US private housing starts declined to 1.42 million in 2023 compared to 1.55 million in 2022 and 1.61 million in 2021, while Canadian housing starts dropped to 240,000 in 2023 compared to 261,000 in 2022 and 271,000 in 2021. A newly originated mortgage consumed 33% of average household income at year- end 2023 versus 39% in 2022 and 25% in 2021. Because of higher mortgage payments from higher interest rates, consumers often remained where they were instead of upgrading from a rented apartment to an owned home or from a smaller house to a bigger house. Falling mortgage rates may mean that
Above: Single family home with OSB sheathing and roofing WBPI | April/May 2024 |
www.wbpionline.com
better days are ahead for North American homebuyers. When releasing projections for 2024 from the National Association of Realtors (NAR), chief economist Lawrence Yun commented: “Mortgage rates likely have peaked and are now falling from their recent high of nearly 8%. NAR predicts the 30-year
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