LUMBER PRICES FORECAST HOUSING STABILITY
Lumber prices continue to show signs of stability. This is certainly a positive sign for the housing market as lumber prices tend to have a very high correlation with housing prices. Although lumber futures have recently come off their highs the trend remains clear – up.
The latest data on lumber demand from Random Lengths also shows stability in demand as total production jumped 4% month over month:
Canadian lumber production in October totaled 1.8 billion board feet, up 4% from September and the highest mark since last November, according to Statistics Canada. The British Columbia Southern Interior gained 20% month-to-month; all of B.C., as well as Nova Scotia, gained 10%. Only Quebec decreased from September. With a second straight monthly increase, year-to-date production reached 15.7 bbf, down 23% from last year. Output in British Columbia reached 8.1 bbf through October, down 22%. Alberta output declined just 10%, to 2.4 bbf.
Yeah right.
While I hope you are correct, I think it more likely price stabilization is the result of a mild inventory rebuild. New home sales have been horrible. And the chart shows that Lumber prices are now below levels attained in June ‘09. IMV the chart doesn’t display a meaningful trend so much as an increase in volatility with a possible blow-off top…..
I notice the Lumber Futures are holding steady for 6 months or more which in my estimation is only a result of the industry taking turns buying and selling their own futures to make it look that the Lumber Market has Bottomed or at least steady or maybe even increasing. Probably saving themselves a few bucks as if they didn’t control it who knows where the prices would be as THERE IS NO MARKET!!! and will not be for until who knows when and in what century.
I should clarify – this data is all out of whack due to the stimulus plans. We won’t know how strong the economy really is until Q3 next year when much of the housing and other stimulus has worn off.
Yes you should clarify. Your blurp headline fooled only those who dont bother to look deeper. It did not fool Tom, Dick or Trev, but nice try. When you see new home sales turn up then you can repeat your absurd headline. I guess your just part of Team Obama propaganda machine. Your sight is now nothing more than a part of mainstream media. Same goes for your bs headline on rail traffic. Obama must be so proud of you. Neither you or team goldmanbama have fooled any but the most ignorant.
TPC Reply:
January 2nd, 2010 at 2:36 PM
You can go ahead and keep fighting the Fed and ignore the fact that things are in fact improving. Investors like you are the ones who let their biases keep them from actually making money. Like it or not, the stimulus is having an enormously positive impact on the economy. If you were a regular reader you would know that I’ve called this government bull shit run rally from day one when I said the market would begin to rally on March 8th. We all know it’s a false economic recovery that is built on liquidity and government printing presses. I’ve been very adamant about that. But in the near-term it is having a very positive impact.
You and the other negative Nancy’s can continue to ignore it and watch the market melt higher while you sit on your hands. The data is all showing signs of stabilization. I report things as they are and there is no denying that no matter how pissed you want to be about missing the entire rally.
TPC Reply:
January 2nd, 2010 at 2:39 PM
I should add – anyone who is a regular reader knows that I am still very pessimistic about housing in the next few years. This short-term stimulus based stability is not sustainable.
The mills have been given a total reprieve thanks to the forward carry being built into the forward curve of futures thanks to “funds” believing sooner or later that things have to get better in the housing industry or in the commodity itself.
Sadly when it comes to housing…they will not get better for several years unless the Gov’t allows these banksters to bulldoze the repo list that continues to gain strength and numbers.
I am not a nega-tard like many that are out there, quite the opposite, I am one of the few people in the industry using this recent “false hope of a stabilization” you discuss in your original, to my advantage by hedging my cash positions (hint…that I am willing to even buy)
I will check back from time to time on your website though, just to say hey.
TPC Reply:
January 2nd, 2010 at 4:51 PM
This is one of the concepts that gets lost in the mix here. Everyone thinks the market is going to move in these very dramatic swings as has been the case over the last two years, but that’s just not the way markets work. The housing market has taken this enormous tumble, stabilized with government help, and will likely move sideways to lower for many years as we work off excess inventory and the laws of supply and demand reassert themselves.
As we work thru this massive downtrend there are going to be signs of stability and certain hope. As I said in my 2009 predictions, the housing rebound is nothing more than “false hope”. But anyone betting on a continued rapid sharp decline in housing is a fool until the government steps out of the way early next year.
I am curious you say in the original thread that the trend is clearly “Up” (lumber prices) if you pull a 10 year chart…what do you see there? Your chart shows us this past year, but if you look at the bigger picture, it is not as clear.
Personally, I see lumber going back and testing last years numbers, adjusted for CAD/USD exchange rates of course…I am just not so sure the trend is “Up”..in the near future, it is highly unlikely (IMHO)
TPC Reply:
January 2nd, 2010 at 7:13 PM
I think my outlook has been pretty clear all along (at least for regular readers of the site): the long-term trend in housing is very negative, but the short-term trend is positive.
I just don’t how the extension of the housing stimulus won’t translate into a very strong spring buying season early in 2010. That means the builders will go nuts early next year. It’s looking to me like late 2011 is the time to get bearish on housing.
You’re making no mention of currency effects here. About 1/3 – 1/2 of the softwood lumber produced in North America comes from Canada. The futures contract even allows for delivery to Canadian mills. Why don’t you plop a USD/CAD exchange rate next to this chart and see if you notice anything. Here, I’ll do it for you:
Flash Player 9 or higher is required to view the chartClick here to download Flash Player nowif (typeof(embedWikichart) != “undefined”) {embedWikichart(“http://charts.wikinvest.com/WikiChartMini.swf”,”wikichartContainer_77326739-592B-F95D-9951-2E5991A1799C”,”300″,”245″,{“showAnnotations”:”true”,”liveQuote”:”true”,”embedCodeDate”:”2010-1-14″,”startDate”:”16-01-2009″,”ticker”:”USDCAD”,”endDate”:”12-01-2010″},{});}View the full FOREX:USDCAD chart at Wikinvest
Sorry, I guess it didn’t embed. Here, check the chart on Wikinvest.com:
http://www.wikinvest.com/currency/Canadian_Dollar_(CAD)/WikiChart
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