Fears of Higher Lumber Prices Dent US Home Builder Stocks

Shares of US home builders and lumber distributors fell broadly on Tuesday on worries over the impact of higher lumber prices on their profits after Canada’s major lumber supplier Canfor (CFP.TO) moved to curtail operations at all of its British Columbia sawmills, except its WynnWood operations, due to poor lumber markets.

Builders Century Communities (CCS), Beazer Homes (BZH), and Taylor Morrison Home (TMHC) and shares of distributors such as Builders FirstSource (BLDR) and BMC Stock (BMCH) were all lower between 1% and 2%.

“If today’s price spike in the lumber futures causes cash lumber price trends to turn inflationary instead of deflationary, that could be a negative risk to our estimates because the price arbitrage would work against the distributors,” said Wedbush analyst Jay McCanless.

Still, the analyst said a near-term move higher in lumber prices should not affect domestic affordable housing demand which is the primary catalyst for those builders.

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