by Bill McBride on 2/22/2013
Joseph Cotterill at the FT Alphaville blog linked to a post on lumber prices last night: Listen to Lumber. The post included a graph on lumber prices over the last few months, and showed a fairly sharp decline in future prices recently. The author wrote:
Over the past few years, the strength in lumber proved to be a leading indicator for the bullish action we had seen in the homebuilders and, frankly, all housing related stocks.
This week, though, lumber has sold “limit down” …
I have no comment on housing stocks, but I suspect this decline is either just “noise” following a large price increase, or more supply coming back on the market (remember many mills closed during the housing bust, and I suspect some are coming back online). Back in 2010, after the end of the housing tax credit, I noted that lumber prices collapsed. But the dynamics were different (that was obviously tax credit related and not a real recovery).
The recent decline in CME futures hardly shows up.