Charles Gross

Housing demand has been abysmal in the wake of the financial crisis but should accelerate as millennials, the largest generation in U.S. history, enter their 30s. Rising wages and gradually improving loan availability should catalyze improving demand. …We expect starts to peak at nearly 2 million units per year in 2021, nearly on par with 2005, before fading as the demographic boom draws to a close. …We expect total demand to surpass 70 billion board feet in the early 2020s, up 17% from today. As rising lumber demand presses existing capacity to the limit, we expect lumber prices to peak above $520 per thousand board feet in today’s dollars by 2021, up 27% from a 2017 average of $410. Rising lumber prices will lift profits for Canfor and West Fraser, given the companies’ higher degrees of operating leverage and relatively low-cost assets.