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PulteGroup, Inc. Message Board

  • johnmg47 johnmg47 May 13, 2011 6:13 AM Flag

    Why I am long, or 'Unpopular Long-Term Housing statistics'

    Here is a recent chart of housing starts,


    Housing starts rose out of a recession in 1969, 1974, 1980, 1982, 1990, 2001, 2011. Because Pulte is a builder that's been around a long time, we can see how its stock performance performed relative to the sudden burst in housing starts that occurred after the end of each of those recessions. I only have information on PHM going back to 1981.

    1982 - 1984 Housing starts tripled from about 800K to 2.4 ML. Pulte went from .50 to 4.50, or 9x1, in about 18 months.

    1991-1992 Housing starts doubled from about 800K to 1.6 ML. Pulte went from .90 to 3.75, or 4x1, in about a year.

    2000-2006 Housing starts rose 50% from 1.6ML to 2.4 ML. Pulte went from 5.00 to 45.00, or 9x1, in about 6 years.

    Readers on this board know that we are building less housing starts today than 50 years ago (1 ML+). The USA population was 180ML in 1960; 310ML in 2010. The population grew 72% in those 50 years, and housing starts today are running 50% below the level of normalized annual builds that existed at the BOTTOM of each of those previous recessions.

    Today, family formations are exceeding 4 year highs, and live births continue around the 4ML mark, continuing to build on a baby boom that began in 1975 and has grown - unabated - for 36 years. The leading edge of this wave is now in their mid-30s, and the number of first-time home buyers will increase exponentially over the next two decades.

    At the bottom of all previous recessions, the homebuilding industry was creating at least 750K housing starts, and with mortgages varying from 7% to 14%. Today we are building (annualized) about 450K with mortgage interest rates at 4.75%. Relative to incomes, inflation, interest rates, and the cost of renting - it's one of the best times to buy in anyone's memory.

    I know; I know. Numbers are just numbers, like 1+1=2, and 9x1 = 9 fold; and just because a stock doubled or tripled every other time it was in a similar situation with similar statistics at similar time periods at the end of a recession, surely doesn't mean it will happen this time. After all, it's different this time, yes?

    But that's where we differ. I think time is now on my side, instead of against me. And I will keep adding to my position as long as it stays in the $6.50 to $7.75 level.


    As an anecdote, I was looking on a very good real estate website tonight ( and there were hundreds of real estate stories and articles there. Each day there's about 20. I couldn't fine ONE positive article or comment on real estate in the USA going back for months.

    Three weeks ago I shorted silver. The tales of the bulls were inexorable, and they had the performance statistics to back it up; 2 years worth. But a parabola is a parabola is a parabola.

    And it cracked.

    And this is what housing is: an inexorable, negative parabola that seems like it can only go down, and there's 57 consecutive months of data and probably a million stories about it to back that up, and everyone who is short this market is a blowhard know-it-all. Well, maybe you are for now. But this sector is beginning to look a lot like gold in 2001 and tech in 2003.

    Housing starts never creep up. They explode. And the morning is going to come, sometime in the next year, when housing starts "unexpectedly" rise 20% in a single month with permits likewise, and I'll be off to the races.

    I'm not going to look at this one anymore, and probably not post much anymore either. This summer could be tough, or conversely, it could be the beginning of the 'Great Turn'. I don't know, but when the outperformance comes, it will be for at least a year, at least a double, and it will begin when we least expect it.

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    • blah blah blah. the same re whore spewing bullish crap on housing. Housing has become one big LEECH to our economy sticking trillion in losses to the taxpayers via fannie freddie and now the new cookie jar FHA.
      Housing is overrated economic driver. it has failed us and bankrupt us. Time to divert these massive housing subsidies to areas that can support export job gorwth not this big ponzi scam of housing.

    • Both these builders specialize in CA real estate. BRP is a relatively new company, but is concentrated in some great locations - SF, LA, San Diego, DC, Edmonton, Calgary, Toronto.


      I think the housing recession is ending - now - out here in CA.

      The revenue-receipts charts that I have been watching from the private firm (Beaconomics) in their latest March report to the state, shows a steady rise - beginning in March, 2011 - in taxable receipts. The report predicted what's coming about in the article below. The state is beginning to rescind teacher layoff notices too. Beaconomics estimates a 4% drop in unemployment over the next three years with a corresponding rise in taxable revenues to 2007 levels.

      This can only be good for CA homebuilders. As a last note to the permabears who have had a field day on this message board for years: the party's over. When the fat lady sings out here, she belts it out of the park.


      State Revenue Up, But Brown Still Pushes Tax Hikes

      “The governor proposed spending of $88.8 billion, a nearly 5 percent increase over the budget he introduced in January. The boost was fueled by rising sales, personal income and corporate tax receipts -- the three main sources of the state's general fund.

      The governor expects an overall increase of $6.6 billion in tax receipts for the coming year.

      The rising revenue and spending cuts already enacted by Democratic lawmakers and Brown have reduced the projected deficit to $9.6 billion. It had been estimated as high as $26.6 billion at the start of the year.

      (Type in 3 Ws)

    • Looks to me like we are very near a bottom on on CoreLogic chart posted in the article (+/- 5%)

      Btw..saw this today..high-end housing has been absolutely decimated in the Bay Area.


    • For those of you who are interested, my stock picks for 2011 are:

      Tokyo Electric (TKECF) - they own the nuclear plants in Japan that failed. They just signed a compensation agreement last night that requires them to pay 20 cents on the dollar for reparations for the accident. The stock was $25 for two decades. Now it's $6. I think all the news is in the stock. You can read my comments on their message board. In a group of synchronized trades in early April (near the absolute low), a group of unknown investors on the Hong Kong exchange bought $600ML in stock (10% of the shares), at 80 cents below where we are now. I think the stock is worth between $10-12, once all the fear is out of it. $5.50 is Chernobyl pricing. What will it be in normal times?

      KBH - a CA builder that is beginning to specialize in solar homes and communities. I think they'll be big sellers.

      PHM - stated in previous messages. Their retiree market is beginning to show promise now, and their first-time market should improve for reasons stated (above) in the next year or so.

      AGNC & NLY - I bought these guys for their dividends. AGNC invests in AAA rated Federally insured residential mortgage loans. The average credit score on these is in the mid 750s.

      • 1 Reply to johnmg47
      • Of course when Japans credit bubble burst back in the 80's they had 11 strait years of declining real-estate prices in one of the worlds largest economies with one of the worlds most limited supply of real estate. So certainly there is a precedent. The FED has gone all in to re-inflate asset prices and what has been the result? What does the FED have left? If they go with the QE(n) plan then just about everything will outperform housing over next 3 to 5 years. And how long can the FED continue to buy down the long bond? Housing has no strength in a rising rate environment with stagnate real incomes which unfortunately, is a very real possibility. It's not that your wrong, its just that your at a minimum, 3 years early and that's along time to go without a return unless net present value is not a concern to you. The risks for housing unfortunately are not in its favor in the coming 3 to 5 years. Simply stating that HBs are low thus must go up is absurd. Bubbles with a parabolic upside inevitably pop because the asymptote is infinitely large. A parabolic downside curve doesn't have to go to zero but can just become asymptotic at some low value. Incidentally, that's what this stocks curve most closely resembles. Anyway, there's thousands of precedents in the stock market for that.

        Lets see a chart where real incomes in the US are increasing again and I'll reconsider my position. The last time I checked real incomes were flat for the past 10 years. The FED tried 12 trillion times to restart the FIRE economy since the bust. I'm sure they will get their way someday but again, 3 to 5 more years. Perhaps I'm early in my guess as well, all reassess in a few years.

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