Much of the recent stock market optimism has been based on the supposed bottoming of real estate prices. As regular readers know, I am more skeptical than most of the recent housing stability. Every year we experience strong seasonal trends in housing that give investors hope during the spring and summer buying seasons. The price of lumber is an excellent example of such seasonality. As you can see in the following chart lumber prices have spiked in each of the last three springs/summers despite the worst housing environment in the post-war era.
Despite being 30% off the lows lumber prices have fallen 15% from recent highs as seasonal strength in housing begins to wane. August/September have been vital turning points in housing and lumber prices in each of the last few years. If recent price action is any signal we could be on the verge of another bout of weakness in the housing market and that would surely dampen the v-shaped recovery theory.