Still believe in the housing “recovery”?

Two commodity series: Lumber & Copper, daily prices, 2013 YTD

Lots of happy news lately in the US media about the housing recovery but I’m not convinced for two reasons.

First, both lumber and copper are used to build houses. The average home contains about 400 pounds of copper and 30,000 square feet of lumber and wood products. So curious question, if there really is a housing recovery how are these commodities responding?

The chart above show the year to date prices for copper spot prices ($COPPER, red line) and lumber ($LUMBER, black line). So far in 2013 $COPPER, is down -16.29% and $LUMBER is off -21.23% so what does this say about the recovery? As demand for commodities increases, prices usually follow (in the absence of supply increases). Here we see commodity prices falling.

Second, the housing recovery is more about investors, both individual as well as hedge funds and private equity, making opportunistic purchases of homes than it is about the construction of new houses. It is the construction of new houses that has the biggest bang for the buck in terms of job creation, not the purchase and rental of existing homes.

The chart below shows two interesting series covering the periods 1986 to 2013. Specifically, the Home Ownership Rate (USHOWN, blue line) compared to the Rental Vacancy Rate (USRVAC, black line) for the period 1986 to 2013. Even as the home ownership rate falls the rental vacancy rate is rising.

Still believe in the housing “recovery”?

rate of Home Ownership (USHOWN) compared to Rental Vacancies (USRVAC), 1986 to 2013, annually

rate of Home Ownership (USHOWN) compared to Rental Vacancies (USRVAC), 1986 to 2013, annually

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