The Housing Rebound: Homebuilding Stocks Are Great But Don't Overlook Copper

The homebuilding stocks have been a leader in 2012 on the prospect that housing troubles have bottomed. The SPDR S&P 500 Homebuilder ETF (XHB) is up 46.4% year-to-date. While these stocks are the obvious buy on a housing rebound, such a rebound is a potentially overlooked reason to own copper by the average investor. If housing is indeed picking up again it could serve as a catalyst for the price of copper because the home and office building construction sector uses approximately 40% of the copper in the United States, with direct residential construction constituting approximately two-thirds of the market. There are approximately 195 pounds of copper electrical wire in the average new home constructed in 2010. This does not include the amount of copper wiring that goes into home appliances, plumbing and air-conditioning systems. For months and months we have been hearing about the so-called bottom in housing. If this is the case copper should continue to rise as the housing sector improves. There is some evidence that things are improving. United States homebuilder confidence was up sharply in July, and hit a five-year high in August. In September it ticked even higher to hit the best reading since June 2006. Coupled with increasing property sales in China, a rapidly growing country for housing, I think we could see increased copper demand in the next few quarters. I recommend the following methods right now to play copper...................READ MORE