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To: Joe Stocks who wrote (42698)	8/11/2002 7:33:13 AM
From: DanZ	Respond to of 53068

Does the tail wag the dog or the dog wag the tail? I can see why an increase in home building would increase the demand for building materials, including lumber. However, it also stands to reason that lower prices for homes would increase the demand for homes, and lead to more demand for building materials. Both scenarios are probably true, and I don't know which one has more effect on the price. Ultimately prices are determined by supply and demand. There is a demand curve for the commodity (lumber) and there is a demand curve for the finished product (homes). I agree that the cost of lumber in a home is small compared to the total cost, but I was thinking that the economics that drive lumber prices also drive the cost of other building materials the same way. You're probably right, but it would still be interesting to put a long term chart of home prices, lumber prices, and the demand for homes on the same chart to see if there's any correlation. If one chart consistently leads the other, we might even be able to determine if the dog wags the tail or the tail wags the dog. lol