Optimism about long-term outlook for US housing market supports bounce-back in lumber futures prices on Sep. 19, November contract closes up US$1 at US$274.10/mbf

LOS ANGELES , September 20, 2012 () – Optimism about long-term prospects for the housing market helped futures prices bounce back on Wednesday, after declines on Tuesday as traders reacted to declines in equities and commodity sectors, according to a commentary by Dow Jones.

Housing data released by the U.S. Dept. of Commerce on Sep. 19 showed a drop of 1% in August building permits from July to an annual rate of 803,000 units, but the figure was 24.5% higher than the rate in August last year of 645,000 units. Housing starts in August were up 2.3% from a month earlier to an annual rate of 750,000 units - 29.1% higher than the rate in August last year of 581,000 units.

Data released on the same day by the National Association of Realtors showed existing home sales in August at an annual rate of 4.82 million units, the highest since May 2010 and a 7.8% increase from July.

Short covering after Tuesday's declines also supported Wednesday's price increases, which saw the November contract close up $1.00 at $274.10 per thousand board ft.(mbf) and January up $1.50 at $288.00/mbf. Cash quotes were in a $290-$292/mbf range.

Tuesday's declines were attributed to uncertainty about the near-term direction of the cash market and buyer caution on further declines in equities and several commodity sectors, Dow Jones reported on Sep. 18. Even so, one broker noted that futures are 17% higher than levels at this time last year, demonstrating improved demand for lumber.

On Tuesday, November closed down $2.90 at $273.10/mbf and January dropped $2.80 to $286.50/mbf. Cash quotes were reported in a $290 to $292 range.

The primary sources of this article are Dow Jones, Chicago, on Sept. 18 and 19, 2012, data released on Sep. 19, 2012 by the U.S. Commerce Dept. and National Assn. of Realtors, and daily settlement prices for lumber futures from the Chicago Mercantile Exchange.

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