As home builders’ stock prices climb due to the rebound in the overall housing market this spring and are projected to continue into the summer, another group is benefiting too: the companies producing all that lumber to build those houses.
A housing market that has seen few existing homes going up for sale due to current homeowners hesitant to give up their low-cost mortgages is creating increased demand for new homes and that’s good news for the companies that supply the raw materials to build them. Namely big lumber companies.
The Wall Street Journal reported recently that the stock prices for some of the best-known names in the business such as Weyerhaeuser and Boise Cascade have been climbing as demand increases. Also benefiting are publicly traded sawmill owners and those firms that make wooden building components, like paneling. Analysts reported they are increasingly recommending buying shares in these companies as they see the new home-building market continue to improve.
But they cautioned they don’t see the wild runup in lumber prices that the industry saw in the depths of the pandemic when the home building exploded and demand reached unprecedented levels. The wildfires in Canada, which has impacted lumber supplies, are creating some supply problems and are likely to drive up prices somewhat but it should be a relatively short-term factor.
The Journal surveyed analysts and found that Raymond James had added Weyerhaeuser to its list of top buys while Truist upgraded both Boise Cascade and Louisiana-Pacific to buy ratings. Said Truist analyst Michael Roxland, “The worst of the housing slowdown is behind the industry.”
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