Independent, Fee-Only Financial Advisor

Independent, Fee-Only Financial Advisor

Tuesday, March 05, 2013

Housing Recovery

One interesting indicator behind housing is Lumber. Lumber is, of course, used to build houses in America, and is a key ingredient in many home improvement projects (like the shelves I just built in my closet this weekend).

The price of lumber is dictated by supply and demand, of course, and that has been a rising price lately. For much of the past 5 years, lumber prices have been between $150 and $250, with two peaks above $300. The end of 2012 and the first two months of this year have seen those prices hit close to $400.

Looking at charts in this article, lumber shipments appear to follow a seasonal pattern reflected in housing prices. This time looks to be different. The seasonal decline in lumber shipments has not been as large as usual. Combining rising lumber prices with greater shipments means much more money is being spent on lumber now than at the peak. When money flows representing desires and expectations in the economy, more money going to lumber means more confidence in housing - a huge driver of the American economy.