* May highest for lead contract since July 2007
* May through September post contract highs
* Housing expected to improve this spring
* Cash market higher following futures
(Updates with closing prices)
By Jerry Bieszk
CHICAGO, April 5 (Reuters) - Chicago Mercantile Exchange lumber futures closed up 3.1 percent on Monday, with May at the highest level for lead contract since July 2007 and nearby months posting contract highs.
Reports of a stronger cash market and expectations that housing will improve further into the spring prompted short-covering and speculative technical demand. But futures have been leading the rally on speculative and technical-based buying, traders said.
“This is not a cash-led rally. It’s a futures-led rally because we have been premium the entire time,” said Robin Cross, broker with FC Stone. “There’s technical spec buying looking for contract highs.”
“The board is going to give cash a little boost,” he said.
Lumber mills have cut back production and a number of lumber mills have closed in the past year in reaction to slow sales. As demand improves or futures rise, it causes cash to rise and expectations are that housing will improve this spring after being depressed for some time.
Traders cited reports that one large mill has raised its asking price for spruce to $294 per tbf, up from the $286 level posted by Random Lengths Wednesday ahead of the holiday weekend.
The housing market is showing small signs of improving. Contracts for pending sales of previously owned homes unexpectedly rose in February, a survey from the National Association of Realtors showed. [ID:nN05179006]
Traders noted much of the gain in used home sales can be attributed the soon-to-expire tax credit for first-time home buyers. New home construction has remained slow despite the tax credit, but this is seen improving as warmer spring weather draws buyers to new home sites across the country.
Prices of U.S. single-family homes rose in January for the eighth straight month and the annual rate moved the closest it has been to an increase in three years, Standard & Poor’s/Case Shiller home price indexes showed last week. [ID:nN30139636] (Reporting by Jerry Bieszk; Editing by Lisa Shumaker)