Lumber Sales Benefit from Residential Construction Activity

New York, NY, July 3, 2023-"Their stocks aren’t quite as hot as home builders’, but Weyerhaeuser, Boise Cascade and others that own sawmills and make wood panels have been big winners lately, thanks to the recovery in residential construction,” reports the Wall Street Journal.

“Housing starts rose in May to a seasonally adjusted annual rate of about 1.6 million, the Census Bureau said last month. That is 22% more than in April and the most since the Federal Reserve began raising interest rates early last year to cool the overheating property market and squelch inflation. It also means builders are going to need a lot more wood.

“Wood-products firms were among the leaders of the pandemic stock rally, banking windfall profits when stuck-at-home Americans remodeled all at once and lumber prices shot to the moon. The stocks slumped when wood prices fell back to earth and higher interest rates slowed the housing market last year, but their star has risen anew with investors.

“Shares of sawmill owners Interfor and West Fraser Timber along with Boise Cascade and Louisiana-Pacific, which specialize in engineered wood products, each rose more than 25% in June. Canfor and Weyerhaeuser last month added 24% and 17%, respectively, compared with a 6.5% gain in the S&P 500 stock index.

“The sawyers have the pandemic’s ultralow interest rates to thank for the jolt.  

“Millions of Americans are locked into mortgage rates below 4% and face much higher borrowing costs if they move. The average rate on a 30-year mortgage was 6.71% this week, according to mortgage finance giant Freddie Mac. That is down from more than 7% last autumn but more than twice the rate two summers ago when lumber prices surged and droves of homeowners were refinancing their mortgages-often taking cash out in the process to pay for renovations.”