Lumber Prices Are Rising in The U. S. Because of Greater Demand in Asia

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. 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. Source: nasdaq