Lumber prices are rising in the US 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 has climbed more than 5.22% in market action for the month. Source: Nasdaq
According to US 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.
The Xinyuan Real Estate Company, a Chinese home building company, 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, 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 Asian demand driving lumber prices and international real estate higher.
The fact that US 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.
