3 Homebuilders to Buy as Lumber Prices Fall
StockNews
Published Jun 23, 2021 11:34AM ET
Updated Jun 23, 2021 12:31PM ET
3 Homebuilders to Buy as Lumber Prices Fall
With the lumber prices cooling off, homebuilding projects that were put on hold due to lumber’s high price are expected to resume. As such, we think it could be rewarding to bet now on fundamentally sound homebuilding stocks Skanska (SKBSY), Tri Pointe Homes (NYSE:TPH), and Hovnanian (HOV). These names are well positioned to benefit from the recommencement of building projects. Read on.The demand for new homes has increased significantly over the past year, with buyers looking to relocate from cities to suburban locals for bigger living spaces amid the remote working trend. This, along with a surge in interest in existing-home renovation and do-it-yourself (DIY) projects, has led to soaring demand for lumber. As the demand for lumber increased last year, the production capabilities of sawmills remained limited due to COVID-19 pandemic-related restrictions. Consequently, lumber prices have soared over the past year.
However, according to industry trade publication Random Lengths, the cash price per thousand board feet of lumber fell 27% last week from its $1,515 all-time high, which it hit on May 28.This can be attributed primarily to increasing production at sawmills as major economies continue to reopen and mill workers return to their jobs. Consequently, several homebuilding projects that were put on hold due to high lumber prices are expected to resume in the near term.
So, based on these factors, we think it could now be wise to bet on the shares of established homebuilding companies Skanska AB (SKBSY), Tri Pointe Homes, Inc. (TPH), and Hovnanian Enterprises, Inc. (NYSE:HOV). They are expected to generate significant returns in the coming months.
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