I'm starting a new short position here (with puts).
Everyone knows about the subprime crisis and its negative effects on homebuilders, same with the upcoming consumer credit crisis. That's all priced in and isn't going to take this down any further.
What I'm seeing is that the higher price of gas will kill the suburbs. Where do you think all the new homes are being built? Where do you think all the land that the homebuilders has is? It's all in those distant suburbs. Demand for suburban living will take a huge dive with high gas prices, not to mention high heating/cooling prices.
This is the next shoe to drop and I haven't heard anyone talking about it.
Well, we had our little "miracle rally" last week but this is still a bear market for housing and I'm looking for low teens here. My bear call spread doesn't expire until Jan09, so there's still plenty of time.
If Fannie and Freddie stop buying mortgages, the mortgage rates will climb by 300 basis points and this thing will nosedive.
(yeah, I'm short FNM too)
Another problem with homebuilders and housing in general is the price of heating. I read an article from a Maine newspaper about the problems they will face this winter...
<<“This winter, the cost of fuel oil is going to more than double,” he said. “What’s being quoted now is $4.96 — $5 a gallon. That’s $1,000 to fill up your tank in the basement one time, and most people are going to have to fill up their tank six times.
“How is somebody who is making $350 or $400 a week going to pay to fill up the tank to keep warm? How are they going to pay to fill up the truck to get to work? This is, I think, the most serious crisis to ever face the state of Maine.”>>
Houses are going to be abandoned, pipes will freeze and the houses will be severely damaged if people can't afford to heat them. 90% of the houses in Maine, and many houses in the northeast are heated with oil. This could be a huge disaster and doesn't have any easy solutions.
That is a great idea. It might even bring about s trend for middle class families similar to ther retirement communities in Florida, except where you will have all your shopping and entertainment right inside your development, and as crime and gas prices skyrocket, the middle class will be safe inside their own little community of apartment buildings, and they will be cheaper than houses. Guess some of us will have to give up the backyard barbeque. But having 24 hour security would be a nice trade off. Imagine, being able to walk under the stars with yoru wife or girlfriend anywhere in the development and have no fear of crime. Even have little cafes that are open all night. I could go for that. This might not be a bad idea in the next few years. Only problem would be keeping out the undesirables, whomever you deem that to be.
Meanwhile , yes, homebuilders in the suberbs might be the next shoe to drop. Good foresight, whomever thought of that one!!! I might just short this puppy on the next week long rally. I am flat XHB now. Like a fool I covered when it gave all those fake bounces 2 -3 months ago.
<< It is called "GO GREEN", "LEED". High density vertical construction, in the "city". Multi-familiy construction, highrise is the answer.>>
Yes, and none of the major holdings in this ETF can do that unless they re-invent themselves.