Lumber prices are rising in the U.S. because of greater demand
in Asia, which is a sign of recovery in the international real
estate market. The exchange-traded fund for lumber, Claymore Beacon
Global Timber Index (
CUT
,
quote
), has climbed more than 5.22% in market action for the month.
[caption id="attachment_70450" align="alignright" width="300"
caption="A one-way ticket to the Asian housing market"]
[/caption]
According to U.S. Forest Service data, log exports grew by 5.2%
in the first quarter of 2012, mirroring the most recent increase in
CUT. Research entity the RISI International Wood Markets Group
reports that overseas lumber shipments more than doubled from
2001 to 2008. Over the past two years, demand from China
has fueled much of the increase in timber exports. The
lumber industry is very closely tied to the housing
market
in the international real estate sector.
Lumber is used in every stage of a house. In the construction
phase, lumber is needed for framing, cabinets, furniture, flooring
and railings. Later, timber is important in remodeling projects,
which can range from adding rooms to installing a deck. Lumber
products are also required for many repairs.
Xinyuan Real Estate Company (
XIN
,
quote
), a
Chinese homebuilder, is up 73.53%
for 2012. Sales and earnings per share are soaring for Xinyuan
on a quarterly basis. Other stocks tied to international real
estate also are up for the year. The exchange-traded fund for the
homebuilding industry, SPDR S&P Homebuilders (
XHB
,
quote
), has increased by 30.39% since the start of the year.
Rising commodity prices offer insight into the strength of the
industries that use the material as an end product. The increasing
price of lumber and rise in the sector's ETF is a bullish sign for
international real estate. Climbing home sales and an increase in
earnings-per-share growth for Xinyuan bode well for the Chinese
housing market. That U.S. timber prices are increasing because of
Asian demand, after falling along with the American housing market
during the Great Recession, is yet another indication of the
importance of the burgeoning emerging market consumer class to the
global economy.
