Reuters reports that the market value of some homes is less than the street price of their copper pipes. The result is that thieves are ripping out the pipes and selling them. Copper prices have risen 400% in the last three years while home prices fell 11% in the year ending January 2008 and could drop as much as 50% from the peak. This creates the ultimate domestic value play.
Here's the opening anecdote from Reuters: "Shards of broken glass outside the basement window of 31 Vine Street hint at the destruction inside the three-story home. Thieves smashed the window to break in and then gutted the property for its copper pipes -- a crime that has spread across the United States as the economy slows and foreclosed homes stand empty and vulnerable."
Demand for copper in China and India has boosted prices dramatically. Scrap copper sells for about $3.50 a pound, against 70 cents just three years ago. Scrap traders estimate that more than 80% of recycled copper is exported to China and India. So if a foreclosed home has, say, $5,000 worth of copper and is on the market for $100, investors could make a profit buying up the house, stripping out the copper, and selling it as scrap.
According to the Reuters interview with Cleveland city councilor Tony Brancatelli, "We're seeing houses sold for $100 that are distressed houses that should not be recycled." Some boarded-up homes in his Slavic Village community have "No copper, only PVC" painted on the boards to stop would-be thieves
Sounds like the kind of value play that would make Benjamin Graham proud.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.
Closing Bell: Dubai sends jitters throughout the market (S, BBY)
Heinz looking good after the second quarter?
Why isn't Bank of America updating its shareholders on CEO situation?
Reader Comments (Page 1 of 1)
4-01-2008 @ 6:25PM
william lindblad said...
Type L and M are the most common copper pipes, valves mostly cast bronze in a home. Size generally 1/2-3/4". System would be hot & cold water delivery. That's the most common. A second benefit to a thief would be a hot water baseboard system. Now, installing these systems requires a LOT of work and they are NOT one hell of a lot easier to remove. Out of a three bed, 1500 sq ft with baseboard you are not going to get more than 200 lbs, and most of the weight will be in the valves. The drain pipes used to be lead, cast iron or brass with a rare copper thrown in and the water supply in these places - galvanized steel. These are the old places and the newer construction uses pvc (poly vinyl chloride). Much of newer construction (depending on local code) is pvc/cpvc, and that's called plastic pipe.
The people that steal this type of item are hard up and stupid. Any scrap dealer would know it's hot when you go to sell.
4-01-2008 @ 8:51PM
hlhneast said...
Today I turned in about $900 in copper pipe, legally obtained as I replace a central boiler with individual water heaters in a 20 unit building. The No. 1 copper, pipe without solder joints in it, went right at $3.00/lb. Even a small handful of pipe can net a thief a crack rock or quart of beer. Thieves are stealing air conditioning outside units for the small bits of copper and aluminum. Its a nightmare for property owners as well as the plumbers trying to make a living. 95% of what I install now is plastic piping, thankfully because to purchase 3/4" copper new is $3.50/ft. With the violitility of the market, my bids are only good for 30 days when it involves copper piping. Its crazy. If you have copper in your house, paint it white so it looks like plastic!
4-01-2008 @ 9:17PM
william lindblad said...
thank you hlhneast for confiming what I said. 900 from a 20 unit building is pretty good but how much labor cost to get it out???? you work for free??? I had to come back to this one because the thieves are just plain stupid. I have did a bit of demo/remo and I can tell anyone that the money is not in copper pipe. Example: Many years ago I was taking apart a large window seat in a business. This was an after hours job and we had to work at night. Material was painted and heading for the trash until I turned one piece over and noticed it was walnut. Turned out to be about 100 board ft. At 6 a board foot it went into my truck. It was 5/4 and I took 3 when I sold it. Remember, I got paid to remove it also. All legal. Did another job that had about 200 ft of chestnut. Go check price. Architectural elements - antique bath fixtures, gigerbread, heart pine flooring and all associated are far better - just have to know what you are looking at.
P.S. to the theives - don't steal copper wire, it's not worth the effort.
4-02-2008 @ 1:11AM
thebigkill said...
Wow, I'm very embarrassed. I have no idea what you guys are talking about.
I can, however, very realistically visualize investors reading this right now, buying an entire block of Detroit, demolish the home to strip down the copper, rezone the land from residential to commercial for rebuilding, build an apartment complex, and let the investment pay for itself.