Most analysts believe that home prices will continue to fall anywhere in the 5-10% range in 2011.  That seems at odds with what is going in the lumber market.  Lumber is trading at a four-year high.  Homebuilder stocks are in an uptrend.  What are we to make of this divergence?  One could argue that lumber is simply trading higher along with the rest of the commodity complex.  Homebuilder stocks is another story.  Perhaps investors are rotating into laggards.  Perhaps investors optimistic about the economy are buying stocks in companies leveraged to a stronger recovery.  In today’s screencast we wonder just how far ahead are these markets looking?

Items mentioned in the above screencast:

The consensus is that home prices will continue to fall in 2011.  (Calculated Risk)

Lumber prices are at a four-year high.  (Bloomberg)

Daily price chart of lumber futures.  (Finviz)

The trend in homebuilders is up.  (Barron’s, Trader’s Narrative)

Daily price chart of the SPDR S&P Homebuilers ETF (XHB).  (Finviz)