Talking Numbers

Sponsored by

Here’s why you should worry about housing: Strategist

Talking Numbers

What seems like good news is actually disappointing, says one strategist.

This week's good news/bad news housing data brings to mind one of Harry Truman's famous quips. "Give me a one-handed economist," said the 33rd president after hearing "on the one hand… on the other…" too many times.

On the one hand, new home sales were stronger than expected. The US Census Bureau reported Tuesday that new single-family houses were sold at a rate of 464,000 on a seasonally adjusted annual rate last month. That's 16.6% higher than November of last year.

On the other hand, November's numbers were 10,000 lower than last month. What's more, the Mortgage Bankers Association also said on Tuesday that mortgage applications have hit a 13-year low. Purchase applications are 10% lower than they were last year.

(Watch: Slight dip in November new home sales after Southern surge)

Of course, this is all against the backdrop of rising mortgage rates. Rates began to rise as a result of a massive bond selloff starting in May. They are currently about 4.46%, about one percentage point higher than they were in the spring.

While new home sales are up, CNBC contributor Gina Sanchez, founder of Chantico Global, says the numbers are not hopeful.

"If you look at 30-Year fixed mortgage rates, they actually dropped from the end of September all the way to the beginning of November," says Sanchez. "You would have expected a rise [in new home sales] much more than we saw now. So, I see this result as actually very disappointing. It supports the fact that volumes aren't there."

(Read more: US mortgage applications fall as refinance hits 5-year low: MBA)

According to the National Association of Realtors, existing home sales were down 4.3% in November from October and 1.2% from November 2012. Meanwhile, more homes are sitting on the market relative to demand. Housing inventory last month was 5.1 months up from 4.9 months in October.

"If you really dig into the data, it really isn't showing a positive sign," says Sanchez. "Inventories are continuing to rise. So, I don't see this as a bullish sign. I actually am very concerned right now about the housing market."

One way investors can play the housing market is through the SPDR S&P Homebuilders ETF (the XHB). Its name is slightly misleading; besides actual homebuilders, the ETF also contains furniture companies and other providers of home products. The XHB has had a choppy year but is currently up 23.6% since January compared to the S&P 500 index's return of 28.6%.

For Andrew Busch, editor and publisher of The Busch Update, the XHB's close at $32.88 on Tuesday is significant because it crosses the $32.70 level.

"If we fall back below that $32.70 line, then I'd take some profits on XHB for sure," says Busch. "Otherwise, hold on to it until you do because while things have improved dramatically for the housing market overall, there are some headwinds. Higher interest rates are part of that."

To see the rest of Sanchez's fundamental analysis and Busch's technical analysis on housing and homebuilders, watch the video above.

More from Talking Numbers:

Waiting for NASDAQ 5,000? Don’t hold your breath, say strategists
Why 2014 could be worse for gold
Why this takeover candidate could still be undervalued

________________

Follow us on Twitter: @CNBCNumbers
Like us on Facebook: facebook.com/CNBCNumbers

View Comments