By Michael Hirtzer
CHICAGO, Feb 20 (Reuters) - U.S. lumber futures fell more than 2 percent to the lowest level in two weeks on Wednesday after housing starts declined and fell below analyst expectations, traders said.
Benchmark futures for the building material had their biggest two-day slide in six months after hitting a nearly eight-year peak on Monday at the Chicago Mercantile Exchange.
CME lumber for March delivery climbed above $400 per thousand board feet for the first time since April 2005 on Monday before declining by as much as the $10 per tbf daily trading limit.
Lumber futures nearly fell the trading limit again on Tuesday before trimming losses, ending $8.70 lower at $381.40 per tbf.
“We went up way too soon,” Robin Cross, chief operating officer at brokerage Paul Court Company, said from the Chicago trading floor.
“The market is definitely better but housing is just grinding better. There’s some underlying confidence but we don’t want to get ahead of ourselves,” Cross said.
Groundbreaking on new U.S. homes declined 8.5 percent in January to an annualized rate of 890,000 units, below expectations of 925,000, data from the U.S. Commerce Department showed.
Quarterly results from Toll Brothers, the largest luxury homebuilder in the country, also missed expectations, further pressuring wood prices.
Still, single-family unit housing starts were the highest since July 2008 while permits for building permits for new construction also jumped to a 4-1/2 year high.
Futures had also been trading at a premium to cash, with benchmark western spruce pine fir priced late last week at $390 per tbf, according to Random Lengths, which tracks prices and trends in the lumber market.
“Premiums at such historically high prices are difficult to maintain so the second we broke, we had a very bearish move that led to some technical selling today,” Cross said.