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What Lumber's Impending Trend Test Means For Housing
This week saw yet another nail in the coffin of the 'hope-strewn housing-recovery escape-velocity growth engine of America' meme when new home sales collapsed. Homebuilder stocks, while volatile, have been trending lower recently (notably underperforming the S&P) as macro disappointments continue but, as Stone-McCarthy notes, it is the moves in lumber prices (the prime material used in home construction) that is of particular concern.
Top-down, housing macro data has been anything but reassuring...
h/t @Not_Jim_Cramer
But as Stone-McCarthy notes, it is the trend in Lumber that is most concerning...
Since lumber is the prime material used in home construction, not only is its direction a barometer of demand for new homes, but lumber prices also act as a leading indicator for homebuilder stocks. This tendency to lead can be seen on the chart directly below. Note: While some of the price spikes on the lumber chart below may be due to fact that the capacity of the homebuilding industry and many supporting industries was vastly diminished after the housing bust, the focus of today's Chart of the Day has more to do with the trend changes that have been highlighted.
From this next chart, we learn that both lumber and homebuilder stock prices are now approaching critical junctures in their respective post-crisis bull markets. Specifically, the top chart directly below shows that, since the crisis lows, lumber prices have tended to bottom between 1 and 2 standard deviations beneath the all-important 200-day smoothing line. With lumber prices now entering this support zone, and the S&P Homebuilder Index now reverting down to a critical area of linear support, market participants should be keeping a close eye on how these markets respond over the weeks ahead.
This is especially true since any breach of trend by lumber prices, after the massive divergence that has been building against homebuilder stocks for the past several months (see dashed red line) could translate into a bearish signal for homebuilders and new home sales in the months that follow any sustained trend violation.
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Well, golly gee wiz.
Lumber's not going up right now because the green shoots aren't big enough, yet.
Like Joe Biden said, "Thank you for making me feel relevant, again".
I feel a Lewis Black moment coming on....
And if all goes wrong on the international stage, you can also discuss nuclear-fuck-holocausts.
Good, you concentrate on the rising costs, and I will concentrate on the of quality of the wood, or the lack of it.
Lumber is just another commodity that is now manipulated the same way that oil, wheat, live hogs or orange juice is, in the wake of the of the The Commodity Futures Modernization Act of 2000 (CFMA) (aka Gramm-Leach-Bliley Act)
and its price therefore bears any real relationship to what used to be the real demand/supply curve.
Think about it; lumber is now priced 260% higher than it was in 2009, even though the amount of new residential construction is only up a tepid 40% from the depths of the abysmal 2009 permit lows (and new construction is off the 2006 permit highs by a factor of 4.5x - there were 2.1 million single family unit permits pulled in 2006 vs 450k to 489k today).
Why is that? Lumber should be priced at 50% of its current price (or less) if free markets based on true supply/demand ruled the day. The same holds true for many other constituent commodities used to construct housing, which means that commodity pricing is het one more rigged market artificially raising consumer prices, thus screwing said consumers (and the tax assessors love it, since property tax rates are based at least indirectly on transaction prices).
If anyone cares to understand how badly financial entities owning the commodity markets are helping to further destroy free markets & capitalism, do research using objective resources on the Gramm-Leach-Bliley Act/CFMA.
Anything that can be commoditized in modern Amerika by The KronyKapitalists is (e.g. oil stored offshore in anchored cargo holds of super freighters, never to reach the terminal in Cushing where they would ordinarily dock and unload their contents), which completely destroys what used to be free market pricing based on normal demand versus normal supply.
The same holds true for metals such as aluminum, as the facts recently revealed regarding JPMs/Goldman's/Barclays warehousing racketeering operation based on LME "rules."
Nah, it's just the China housing bubble bursting driving the cost down. Nothing to see here, move along.
Besides, I thought the whole industry was moving towards 3D printed houses (complete with furniture) anyway.
"I have one word for you. Are you listening? Plastics."
Speaking of coffins..
The charts do not seem to reflect the boom market in lumber for coffins necessitated by Obamacare.
..and the demand for nails will affect the steel charts, too.
fiberglass make for better coffins.......Though I doubt if the occupants will really care much.
Plastics are a byproduct of petroleum.......and don't have a good shelf life or weathering ability, without expensive alloying.
Petroleum is carbon and water.
Plenty.
If anyone cares to understand how badly financial entities owning the commodity markets are helping to further destroy free markets & capitalism, do research...
Without a doubt. The privately owned fed's monopolization of Congress' Constitutionally required task of coining money and controlling the debt / good faith of the USG has allowed it's member banks to monetize every aspect of life in the US, including the degree of mobility, aspirations and sense of "freedom" people are allowed to experience.
The US paradigm has been stood on its head and until the judiciary begins to issue right and just rulings, our judges and the courts they convene will continue to be run by nothing more than slavish political hacks and worthless appointees of hypocritical justice and honor a Soros and his ilk can buy.
Someone pointed out recently how Roman citizens at one time entertained the thought of forcing slaves to wear armbands or some other kind of identifying mark but soon thought better of it because they realized with fear that they, the slaves would then be able to see their own vast numbers and thereby the strength they actually held over their "masters".
There’s a lesson for those of us outside the beltway and city hall in there I think.
jmo.
Your opinion is solid.
Lumber needs to go down, its too damn expensive
expensive is a relative term when compared to the price of a falling USD
It has some. OSB was under $7 for years then after the hurricane it was $15. Ouch! Now it's back to $9 which seems cheap... but it's not, is it?
The true reason lumber is so expensive is due to the cost of fuel. Every step to produce the lumber and get it to your local supply store requires fuel. Until the cost of fuel goes down we will not see cheap lumber, or any other building materials for some time. They have not invented solar powered chainsaws, lumber mills, tractor trailers, etc.....
duh
"The true reason lumber is so expensive is due to the cost of fuel. Every step to produce the lumber and get it to your local supply store requires fuel. Until the cost of fuel goes down we will not see cheap lumber, or any other building materials for some time. They have not invented solar powered chainsaws, lumber mills, tractor trailers, etc....."
DING DING DING !!! WE HAVE A WINNAAaaaa !!!
Peak Cheap Energy......she is a bitch ! And far reaching as well.
"Peak Cheap Energy"
Knowing how manipulated and corrupt the markets and everything else are, how do you know?!
This chart is from the I.E.A. showing past, current and future projections for U.S. oil production including "tight oil" which is the kerogen (not oil) that is being fracked out of the ground. Even at the peak of fracking...we will just get back to the maximum historical output from 30 years ago....before the decline. Why is the decline inevitable ? Because we know where all the oil and kerogen are buried in the U.S. and once that is pumped it's gone. Also.....fracking is more expensive....(not to mention deep water well drilling in the Gulf of Mexico)....so even if we found more kerogen to frack or more GOM oil to deep drill, that oil is either underbaked or overbaked and is not suitable for derivatives to be made such as light sweet crude oil.....which we have already tapped the majoirty of and are now almost dry.
http://www.energyvanguard.com/Portals/88935/images/peak-oil-IEA-World-En...
This chart show past, present and future coal production in the U.S. Although it does show a ramp up of POSSIBLE....POSSIBLE....new coal adds....you can see that past 2020 the output levels off (PEAK) and we will not be able to satisfy future demand with more production.....(this is PEAK CHEAP ENERGY DEFINED). But here is the kick in the balls. This is POSSIBLE additions to coal output....just like the above is the POSSIBLE additions to oil. There is NOTHING here that explains how much MONEY will be needed to extract further production. Trust me....it will NOT BE CHEAPER in the future regardless of the debasement of our currency.
http://static3.businessinsider.com/image/4ced42d8ccd1d5851a0e0000/peak-c...
Now if this chart does not explain Peak Cheap Energy....nothing will convince you. It is a chart of the ENTIRE WORLD'S CRUDE OIL PRODUCTION...(including America's Fracked Kerogen...which is NOT crude oil)
Look at EVERY countries chart rendered in different colors. See something interesting? That's right. EVERY COUNTRY REACHED THEIR PEAK OUTPUT BETWEEN 2006 AND 2013 and HAVE PLATEAUED OR ARE IN DECLINE. With one exception.....America. WE ARE THE ONLY COUNTRY THAT IS HOLDING UP THE GLOBAL OIL PRODUCTION AND IT'S NOT EVEN WITH CRUDE OIL BUT EXPENSIVE FRACKED KEROGEN !!!
http://crudeoilpeak.info/wp-content/uploads/2011/02/Incremental_crude_wo...
You asked how I know......well......there you have it. And this is just the TIP of the iceburg when it comes to all the data available to you or I. Yes....you can manipulate and corrupt the markets. But that does not apply to what is known to be in the ground that is already tapped and what is in the ground now and has not been tapped.
Finally.....let me leave you with one more interesting chart. It was from Howard Kunstler's book "The Long Emergency" published back in 2005.....now 9 years ago. He included in this Peak Oil forecst chart predictions of what would be happening in society and finances as we rode the Peak Oil Curve down. Now....you honestly tell me he wasn't on to something 9 years ago....when you look at what he predicted would happen as a result of peak oil in the future.
http://spacecollaborative.com.au/2030%20Sydney/Research/Sustainability/J...
Pay close attention to where he dated Price Spikes and Profiteering.....then Unemployment and Recession.....then a boom in Alternative Energy (think bubble). Fits close....DAMN close to what we have already seen.....and he saw this correctly in 2005....even before.
BTW....the numbers in red, green and blue at the bottom of the chart are ages of different populations (think Baby Boomers, Gen Y'ers, and Millenials and how they age over time along the length of this graph. And you can pretty easily see how towards the end we have a crap ton of dead weight on the economy BUT who still need cheap energy to support their retirement dreams....which are just that.....dreams. Soon to be nightmares.
You ask how I know. Well.....here's just a little taste of the VAST amount of hard data which proves the case. You have access to this same data. You just need to educated yourself and prepare. Then you will know just like I do now.....and you can spread the knowledge.....just like I did to you.
I'd like to see wood up.
Dat's what she said
The mystery of Morning Wood:
http://www.youtube.com/watch?v=luSZDZErQUw
Back before the so-called 'industrial revolution', how did all those people manage to build houses out of wood (you know, without petroleum)?
If you can find a girl who actually LIKES Morning Wood, you're a lucky man.
Just an observation that new construction going on near me do not use full plywood cover between frame members which act as membranes structurally preventing wind and shear forces but only reinforce the four corners thua saving 50% of the material. The runners on which exterior walls are nailed are not anchored down to the slab which allows strong winds to lift the whole structure off its foundation.
Overall, the are cutting corners sacrificing strength and safety. Most fixtures are builder's grade and if you want better the option list can even double the price. Buyers beware.
good to know, thanks!
What part of Mexico do you live in? We don't build anything around here without extensive engineering. My new house has 11 hold downs with 24" x 5/8" anchors as well as 10" x 5/8" bolts on 48" c-c , many 5/8" plywood shear walls, strapping between floors, 3" c-c shear nailing, H2.5's on the trusses, and so on....
Probably a pesky government regulation in a hurricane prone area. Mexico doesn't have those pesky regulations. I was there in a non-tourist part of the country on a business trip a few years ago. Drove by the same rotting dead dog carcass three days in a row on a major road near my hotel.
Here in Thailand, I have been driving by the same dog carcass for weeks. All of the "meat" inside has been eaten/decayed, and now the hide is starting to fall apart in the heat and solar radiation.
Part of living in the third world; we don't have animal control.
Since you know your stuff, whoever was doing your house knew he could not get away with it. Or you built your house yourself. Unless of course you are a builder and my comment struck a nerve. No offence to legit home builders.
The upper framing was preassembled in the factory and was put together at the site. The drawings may show all is required by code but whether is done or not may be another story.
BTW: Nothing wrong living in Mexico, even though I do not live there. Mexico uses totally different materials than the US anyway and on top of that, yes! many crews were actually Mexican small subcontractors supervised by an American.
I will try to find a way to post these pictures since we documented everything from our window during the whole process in that subdivision on Maine steet anytown USA. Be on the lookout
that is all part of their plan - build cheap houses that look good but lack quality and that need new systems, repair or remodeling in 10-15 years.
What I do not understand, and wish the author would correlate, is the quite unimpressive new housing starts during the referenced period.
Lumber and wood are so old-fashioned.
Not for fine long gun stocks.
Good for making longbows too
and recurves too
:)
I'm a woodworker and I say "hold still whilst I hit you whilst I hit you with a 2 by 4!"
Concrete block in Florida. Metal 2x4's. Only wood is in prefab roof trusses. There's some company on Youtube that 3D "Prints" a house in under 20 hours for $5000. Concrete saves alot on insurance over woodframe, but at $5000 you wouldn't need insurance. Or a mortgage. Lumber better get down to a price where they have to use it, and all the carpenters too, or else save the finance industry (again).
Florida has serious termites.
Only WOOD houses have termites. Or carpenter ants.
Short Lumber, Watch "3D House for $5000" >>> http://www.wimp.com/printerhouse/
This stuff is fascinating to me as it represents a major disruptive technology to current industry conventions/standards.
There are a few things I don't understand about it, in terms of mechanics, such as where the electrical wiring and plumbing would go (I know it would go somewhere on the outside, because of the potential for leaks or need to re-wire, etc., but would it go in between the concrete and an outer "sheath" such as gypsum board set upon maybe a 1 1/2" stud with a vapor barrier on outside walls?
Also, concrete can be VERY cold (it's great in hot climates, though) and it doesn't allow for makeup air and those who live on a slab foundation house know this, and I'm wondering if the house has to be built on an elevated joist platform (like a crawlspace because of this) and what mechanical systems would need be added to provide additional makeup air, control for humidity, etc.
First, that video is 2 years old, I'm sure your concerns have been addressed.
Second, the wall is actually a cement version of corrugated cardboard. Lightweight, insulated, stronger than steel.
Hey see this today at Marketwatch? http://blogs.marketwatch.com/themargin/2014/04/30/chinese-design-firm-builds-10-homes-using-3-d-printing/
and the international building code...same dif
Some of those asian termites that now infest South Florida will chew through cement blocks to get to the wood components in a house.....even to eat pressure treated southern pine.
Asian termites.
Yeah, I suppose that's logical.
Florida has a seasonal need for wood (because of all the hurricanes that consistently destroy houses, and the need to board up windows).
I seem to remember the stories in the early to mid-2000s, about Chinese OSB, and the issues that it has with off-gassing (and rotting where it stands). LOTS of 'new construction' had these issues; most of them in the southern states (including FLORIDA). I guess those little asian termites must have hitched a ride...
THANKS, HOME DEPOT (you 'global economy' WHORES). I hope your PROFITS were worth the plagues.
That's one that we can add to the list.....suicided......homedepoted
Sorry to rain on the parade, lumber will continue to prosper for the paper industry. As government grows, so does the demand for paper.
Keep those ideas coming Atomizer. a friend
There's not enough trees on the planet to print as much as these fuckers need, hence zeros and ones on hard drives.
Moore's law is their friend - until it breaks.
Exponential growth is a bitch, eventually.
"but lumber prices also act as a leading indicator for homebuilder stocks."
Somebody's clearly living in the past.
agreed.
but they indicate usage.
and they seem consistent with the truck traffic on the highways.
things in the real economy are comin back a bit. folks doin a touch bettor...
not enough for those who rely upon complex math with a need to psych other math-a-beings to bid another penny higher.
law of large numbers, you know.
:)
I "like" this info. (Facebook World Order terms-zh get with it).
I digress: it's always decent here, fumbling along, trying to guess the spot of the 'collapse'. I hope in 2027, s/p (renamed Yellen 500) @ 46,000 that
zh is still as poignant writing about truth.
Nothing. Stops. This. Market.
BTFD
Wut da' phuck, OVER. Lumber's not receding in price because of the Bernacke Dollar. In the upcoming, think commodities. Have you seen the coffee quotes lately and how much they've skyrocketed. During the "not so great" depression, 3 things made money. Alcohol, cigarettes, and movies. Some other stuff as well, but it's non-reportable as in "dark markets".
I see decending wedges. Am I wrong?
charts need to go back to before housing boom to be relevent.
epa trucking cost.
Old joke: Phone rang in the lumber pit - all three guys broke out laughing.
We Need Lumber Support!
Woop dey it Is
Philly Housing Index shows a more realistic alignment with lumber.
http://bullandbearmash.com/chart/philly-housing-index-weekly-falls-hard-...
Remember an ETF is dependent on its "smoothing" components - they don't always align with what is really going on, particularly commodity based ETFs such as USO and GLD.