Notching new 6 month lows. Inflation in check.
Aggressive fed rate increases already baked into the market, but now have to be unwound due to tame inflation data recently out.
Mortgage rates should fall with a strong background economy for new buyers to take hold of. Never have I seen this many 25 year olds owning homes!!???
I've been on fire and called numerous earnings plays this season, SYNA, APPL, RYL, FFIV, APPX.
I wouldn't mess around shorting real companies with my golden touch.
Good luck longs and wait till the volume really gives this puppy a push.
Spoken like a true CNN economist that know jack. Yea interest rates will stay down while the US uses up 85% of the worlds savings for our glutonous consumption based on borrowing. That sure sounds like it will continue infinitum. This bubble will pop like they all do.
2/28/03: "Investors and homebuyers alike may be getting ready to slam the door on the recent strong stock performances of the home-building sector, amid signs of deterioration in the long-strong housing market." (Queena Sook Kim in the WSJ).
3/7/03: "All economists make bad calls now and then. But when it comes to forecasting housing trends, few have missed the mark as widely as N. Gregory Mankiw, President Bush's pick to head the Council of Economic Advisers. Just before the start of the current housing boom, the Harvard University economics professor made a big stir[in a 1989 research paper] by predicting that home prices were on the verge of a long-term downward trend to levels 'lower than observed at any time in recent history,'...3% a year, or nearly 50% by 2007." (Patrick Barta in the WSJ).
4/4/03: "Housing Booms Tend to Collapse" Study Finds More Harm From Home-Price Busts Than Bursted Stock Bubble." (Headlines to a story by Greg Ip in the WSJ that really didn't warrant the scare headlines).
4/21/03: "Housing's Last Hurrah" (headline in the Washington Post National Weekly Edition to a column by economist Robert J. Samuelson, who actually says that "The danger is less a total collapse than a gradual descent).
6/4/03: "If the Roof Falls in," a review in the WSJ by Daniel Akst of the book, "The Coming Crash in the Housing Market," by John R. Talbott.
8/12/03: "Some Homebuilders Face Shaky Foundations: Companies Are Spending Cash On Their Own Inflated Shares, As Housing Sector Begins to Cool" -- Homebuilders KB Home and Ryland Group Inc. are squandering their cash on their own pricey stocks, rather than snapping up attractive land deals or saving it for a rainy day, some investors and analysts say. Builders' stocks as a group are up 35% so far this year. Meanwhile, the torrid pace of new-home sales is threatened by rising mortgage-interest rates, and escalating land prices, a lagging indicator of the new-home market, could squeeze profit margins in some markets. Bearish investors see all this adding up to tougher times ahead." (Queena Sook Kim in the WSJ).
9/3/03: "Insiders are bailing onhome-builder stocks -- Is the housing boom doomed? You don't have to squint to see the writing on the wall. Ever since mortgage rates bounced back from their lows reached in June, home loan demand has sputtered -- falling 13% in a single week in late August, for example. And housing stocks, which were among the biggest winners in the last year or so, look like they've peaked...Inustry insiders insist that prospects for home sales and housing stocks remain rock-steady. But you might find it hard to listen to them with a straight face. That's because home-building executives have been bailing on their own company shares in huge volume...." (Michael Brush at MSNMoney.com).
6/17/04: "It's time to sell your home-builder stocks: Rising interest rates have slammed the door on the big gains this sector has enjoyed over the last four years. Earnings are still rising, but that will slow, too...How far can these stocks fall? As noted above, the group is already off its highs by an average of slightly more than 19%. However, such declines are small compared to the late 1998 to early 2000 decline that saw the average housing stock drop by more than 50%. In other words, if rates continue to climb and orders start to slow, these stocks have plenty of room left to fall...Consequently, investors should not be tempted by the industry's relatively cheap valuations or by its recent history of rallying to new highs afetr every price dip. To the contrary, based on the deteriorating fundamental and technical backdrops, the time has come to sell any strength." (Robert Walberg at MSNMoney.com)
10/26/01: "It's taken a long time for the housing market to feel the slowdown that everyone else has seen, but their time has come [and it] no longer can provide support to the economy that it has in the past year" (David Orr, Wachovia Securities chief economist, as quoted by Greg Ip in the WSJ).
2/27/02: "Home Builders Face Insurance Woes: Coverage Scarce, Premiums High After an Increase in Construction Suits" (WSJ headline).
3/21/02: "the question isn't whether housing and related stocks are in a bubble, but whether it's a bubble akin to Nasdq circa 1996 or circa 2000...'February's extraordinarily strong data suggests to us that housing has hit a ceiling while the economy has hit a floor,' commented Donald Straszheim, president of Straszheim Global Advisors in Westwood, Calif." (Aaron L. Task at The Street.com).
3/22/02: "Although the homebuilders are trading below market multiples, current valuations are 'typical for the end of a cycle...We continue to recommend selling any that are valued at two times book; when the prices drop to book value and below [ed. note: that hasn't happened], we expect to be aggressive buyers'" (Barbara Allen, Arnhold & S. Bleichroeder senior analyst, as quoted by Aaron Task at TheStreet.com).
11/14/02: "I can't find one homebuilder that merits more research right now, because I'm looking for companies offering strong appreciation in the near term...or steady appreciation over many years...and that can pass some initial financial management tests [which point out] some real problems among homebuilders. I'm left disagreeing with the many analysts now trumpeting homebuilders, asserting that their historically low price-to-earnings multiples no longer apply..." (Tom Jacobs at TheMotleyFool.com concluding a two-part analytical look at 17 homebuilding companies).
(To be continued)
12/20/1999: "At last, housing has stopped being one of the growth engines" (David Seider, chief NAHB (!) economist, guoted in The Wall Street Journal).
2/28/2000: "Higher interest rates finally are cooling the housing market," Patrick Barta in the WSJ.
6/19/00: "Construction starts for new homes fell last month, and a drop in building permits suugested the trend will continue (Nicholas Kulish in the WSJ) and "If you're a home builder, you're not very happy" (James Glassman, Chase Securities senior U. S. analyst), quoted in same story.
1/15/01:"...David Weaver at Legg Mason...lowered his ratings on homebuilders in December, saying that the run-up in so-called 'stick' stocks is nearing an end...Investors should avoid the homebuilder stocks..." (Bob Hirschfeld, analyst at IndividualInvestor.com).
1/19/01: "Sunny Housing Market Could Encounter a Cloudy Future: Signals Indicate the Sector May Not Continue to Provide a Cushion to Economy" (WSJ headline).
3/7/01: "Home-Builder Executives Unload Shares: Amid forecasts that housing demand will weaken...insiders at several...concerns have recently sold their own company shares" (Cassell Bryan-Low in the WSJ).
8/13/01: "Doug Kass, a hedge-fund manager with a smashing good record... [is] convinced growth will slow markedly for the homebuilders in the years immediately ahead as the bursting of the bubble takes its toll on sales...and he predicts a very sharp decline in earnings growth for the next half-decade or so." (Alan Abelson in Barron's).
(To be continued)
rates will go up and down that is a fact. the 30 year is not what most people look at anymore anyway you need to look at the 10 year. they said by the middle of the summer the fixed rate should be at 6.5% if this happens poeple will still buy homes at a rate as high if not higher than we see now. mth builds homes in the sun belt states the only thing that could slow this down is 1 they run out of land, 2 matrial shortage, 3 labor to build homes.
the people that are shorting this stock are the sames ones that said the same thing when mth was at 25 a share it was going to die, well that was two splites ago and my crystal ball says they were full of it then and they are now!
Understood but rates are also forward looking.
The softness of the economy right now will tell the fed to ease on rates and take out the modest rate hike policy going forward. This is now being priced in. Look at the charts below, they do not lie. This pendulum swing is from a posture of more aggressive rate hikes about a month ago. Now that the new inflation information says that inflation is benign. Greenspan does not want to hurt the economy with aggressive rate hikes like he did in the 90's.
Good luck longs and go short something else shorts.