Posted on 05/03/2013 10:23:58 AM PDT by blam
Lumber Sales Forecasting Stronger U.S. Housing Market
Housing-Market / US Housing
May 03, 2013 - 12:13 PM GMT
By: DailyGainsLetter
Mirtchell Clark
Mitchell Clark writes: Reflecting the strength in the U.S. housing market, Weyerhaeuser Company (NYSE/WY) reported very good financial results in its first quarter.
The company’s 2013 first-quarter revenues leapt to $1.95 billion, way up from $1.49 billion in the same quarter last year, on solid demand from all its business lines.
Net earnings grew significantly to $144 million, way up from earnings of $41.0 million in the same quarter last year.
On the stock market, Weyerhaeuser is expensively priced, but it certainly is great to see this mature company reporting solid business growth.
Stocks related to the U.S. housing market have been on a tear for the last couple of years, but it is very much a sector that is chock-full of risk.
It is not a group of companies on the stock market that a conservative investor would want to use while saving for retirement.
The Home Depot, Inc. (NYSE/HD) is a component company in the Dow Jones Industrial Average and has been a powerhouse wealth creator recently.
On the stock market, Home Depot has doubled over the last 18 months, which is pretty spectacular for such a mature, large-cap company.
It is a reflection, however, of the enthusiasm that institutional investors have for the U.S. housing market and the resurgence that it is now experiencing.
Of course, there is no runaway bull market in housing, but the action in the stock market reflects a recovering housing market, as does the fact that earnings from housing-related companies are going up.
D.R. Horton, Inc. (NYSE/DHI) reported excellent growth in its latest quarterly revenues of $1.4 billion, up a spectacular 49%.
The company’s earnings grew 173% to $111 million, and management forecast robust demand ahead along with rising prices, which should definitely boost margins.
To be fair, the U.S. housing market has been in the doldrums for quite some time, and comparable figures can be exaggerated—but it is still great to see growth in earnings, the stock market, and orders for new homes.
There is consistency on the stock market among homebuilders and their forecasts for the rest of the year. The majority are predicting better business conditions, earnings growth, and rising prices.
The one area among the group that is a bit of a concern is the cost of raw materials. If business is stronger for Weyerhaeuser, then it obviously translates to higher costs for homebuilders.
Regardless, both the strength in earnings and the performance of homebuilders on the stock market are a significant boost to confidence.
There is still a glut of resale homes in the marketplace, but the data on housing prices in many jurisdictions has turned higher.
Earnings strength for homebuilders has continued momentum over the coming quarters. Many of these stocks have become fully priced on the stock market, but deservedly so.
SHILLER: Enough With The Happy Housing Talk -- House Prices Will Be Flat For 10 Years
"When asked where this all leaves the housing market 10 years from now, Shiller says home prices will be “about where they are now” after adjusting for inflation."
Here is what is happening at the ground level.
Lumber orders have gone up for the past few months. But three weeks ago they went flat. Indicating that the suppliers have refilled their inventory and will cut back.
Prices will drop. Having said that, the big outfit and people I know in the industry are taking advantage of the thing buy increasing production BIG TIME. The result will be a flood of lumber on the market.
The only processed new wood here up where I live is when some old fart mistakes his Veeagra for a vitamin pill.
I haven’t seen a new house being built in my county here for near 8-10 years... only thing I see here is a big ass business in trailer trash (EBT, Section 8) rental trailers being parked anywhere you can get a truck to push one in..
Actually lumber futures topped @ $410 mill (fob Prince George, BC) around the third week of March. They have corrected down to $338 today. Three years ago the market hit $205 mill.
The lumber broker
Duplexes and trailers use wood also, that too is the only thing I see being built around me.
yes....but the only trailers I see in new locations have 6-8 years of “trailer inspection stickers” on one end. This means that they’re old and they are rentals. NOT NEW.
I don't see lumber prices as a good indication of how strong the housing market is in the U.S. What I'm seeing is a housing market that's dominated by migration rather than true growth. That's why you see new housing built in some areas even as homes are vacant in other areas (maybe even in the same jurisdiction).
You are correct to some extent. Yes, certain areas are improving because demographics. However, this has always been the case. All real estate is local. People continue to move south and west. Also, because baby boomers are retiring, they are downsizing their housing requirement. This has led to more multifamily starts. Lastly, the increase in foreclosures the last few years has caused more people to rent than.
Houston , San Antonio, west TX and ND have all improved dramatically better than other areas because of oil exploration. However, many companies that build temporary housing for oil workers(man camp buildings)have benefitted too even though they may be thousands of miles away.
I sell a customer in the Twin Cities. His lumber yard starts(new homes frames)are up 40% from last year. That is in spite of the bad weather they have received the last 2
months.
The fact is we are coming out of the worst downturn in housing since the depression. It is going to take time.
I am constantly amazed at how resilient the American economy is. Despite the constant attacks by obama & Crew, it still muddles on. I can only wish/imagine what we could do if it would be allowed to operate without these constraints.
If we were allowed to operate without Obama we would be paying $1.85/gallon for gas again AND we could make steel in the US and be the cheapest production based economy in the world.
We are growing in spite of Obamacare’s implementation.
We(US, Canada and Mexico)have the most abundant raw materials in the world. With NAFTA we could improve the economy of Mexico so that they could stay and work there instead of coming here.
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