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An Important Divergence in Housing

Note the divergence between lumber prices and the Homebuilders ETF in the chart below. Unless lumber is about to make a mad dash in price to catch up with the surge in the Homebuilders ETF, the drop in lumber futures suggests that either a) we have found a new material by which to build homes en masse other than wood, or b) this could be red flag for the housing market, projecting headwinds for the recovery.

Unless we see a fairly near term catch up in lumber prices, I am going with option b). Hat tip to Grant Williams for initially pointing out the divergence.

Written By: Joshua Ungerecht
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Homebuilders ETF, Housing, lumber