Here's are two extracts from the beginning and end of their 56 page report.

U.S. Housing Market - May 2013 Data

Mortgage Rates Have Moved Higher, But U.S. Housing Momentum Continues

At 914,000, U.S. housing starts in May 2013 are 29% above year-ago levels. Permits are up 31% year over year. Inventories of new homes available for sale remain near 50-year record lows. With household formations forecast at 1.2 million in 2013, inventory shortages will persist.

The U.S. housing market is building new homes at a lower rate than fundamental long-term demand. The recent 100 bps move in the 30-year mortgage rate will not detract, in our view, from growing new home construction. New home construction should have a long runway.

We estimate U.S. housing starts of 950,000 in 2013 and 1,150,000 in 2014. Our 2013 and 2014 lumber price estimates (Western SPF) are $360/Mfbm and $400/Mfbm, respectively. Western SPF prices for the month of June 2013 were $297/Mfbm.

We believe the foundations for a significantly improved U.S. housing market and very strong North American lumber market through the 2014/2015 timeframe remain in place. We continue to recommend building products equities, including CFP, WFT, IFP.A, WEF and ANS




Lumber Stocks Still Have Upside

Lumber equities advanced significantly in 2012, up 70% for the year. However, we still foresee the potential for further investment returns in the range of 30% to 45% over the next 12 to 18 months based on what we consider to be a conservative approach to valuation.

With current weakness in lumber prices we would be adding to the lumber names at current levels. Most of the lumber equities are down anywhere from 10% to 20% from their peaks in late March 2013 and we believe their remains little further downside in the equity valuations at this juncture.

We continue to believe that the lumber-weighted forest products equities have further upside relative to their mid-cycle earnings potential and that industry dynamics are developing to deliver better than mid-cycle pricing levels for lumber for the next two to three years.

As seen in Exhibit 68, the lumber names have narrowed the performance gap with the U.S. homebuilders stocks.

Our favored names include West Fraser, Canfor, Interfor, and Western Forest (WEF–SO) and OSB producer Ainsworth (ANS–SO).