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Lumber Is The Canary In The Homebuilders' Coal Mine

While I have been generally skeptical of the supposed recovery in homebuilder stocks, I have limited my analysis to trends in home prices and the ability of the American consumer to handle a mortgage at current prices. For me, this analysis is sufficient to show that homebuilder stocks are in a pretty large bubble. In the following article, though, I plan to show the value of homebuilder stocks relative to lumber prices, which themselves are a good economic indicator, but also tend to follow the valuation of homebuilder…