Housing Market Tracker - 'Relisting' Could Skew Housing Data [View article]
The real story is that permits, a leading indicator of starts, were down 3%. But more importantly and a far better indicator of both demand and trend, year-over-year housing permits are down 53% while starts are down 56%.
Not quite sure why the media and market focuses single-mindedly on housing starts when permits are a far more reliable leading metric. First, they are less subject to the vagaries of weather, attempts by builders in slow markets keep employees working and the last minute rush to use permits in slow markets before they expire.
However, the real kicker in this market will be the drops we see once incentives like under the table kick backs in existing homes and builder incentives that currently represent 20% of the purchase price in new home sales. They do not nor should they be included in the purchase price and could be skewing home prices upward across the board (and across the nation) by 10% or more. Unless this time is different, we will see incentives dwindle as the number of foreclosures hit the market with no incentives attached. Incentives have skewed all home price indexes upward (see seekingalpha.com/artic... )
Which is the Most Accurate Home Price Index? [View article]
Thanks Locke. I track various real estate metrics including National Association of Realtor median price and inventory data weekly as well as the Case-Shiller and OFHEO home price indexes. For the latest weekly info and charts please go to tradesystemguru.com/co.../
Well said Barry. I have ceased to be amazed with how humorous Lawrence Yun usually sounds. Like his predecessor, David Lereah, credibility doesn't seem to be a high priority but then again I was a realtor for 14 years and learned long ago that real estate boards have a clear overriding bias and that is to help their members sell homes in every market.
I have found the Case-Shiller Home Price Index to be a much more useful metric (see tradesystemguru.com/co... ). BTW, even the NAR admits that year-over-year results are more reliable than month-over-month statistics so the 24% drop in a year is something to pay attention to... (See tradesystemguru.com/co... )
I would love to know how Yun can tell the public with a straight face that the existing home sales will bottom where they are now (4.9 million) and then surge to 5.8 million in the second half of the year when every metric (sales, pending homes, prices, inventories and the rate of change in GDP) are saying otherwise....
Some Color on Toll Brothers Earnings/Guidance [View article]
Couldn't agree more with your Cramer comments. I wonder what he was saying when homebuilders did their last bear rally from July 06 through April 07? Now that builders are doing a bear rally again, there will no doubt be more bottom callers. But now as then, the fundamentals just aren't there (see chart at tradesystemguru.com/co... )
Given that we are just coming off the ugly end of the biggest real estate bubble in history, not sure how anyone with the facts can think this is the ultimate bottom. Unfortunately, that is still a long way off.
Emerging Markets: The More 'Uncoupled', the Better [View article]
Great, except that emerging countries have a lot more downside given that the decoupling analysts have been touting is a load of bull (see tradesystemguru.com/co.../ ) if recent corrections are any guide. In other words, emerging markets like India and China as well as Asian stalwart Japan have a high correlation with markets (and economies) in the US. While I have a great respect for Jeremy Grantham, he may be a tad optimistic on these markets especially given his recent comments on the greatest number of bubbles popping around the globe. How can these markets which are now exhibiting parabolic blowoff tops be better places to invest?
Housing Market Tracker - False Bottom for Homebuilders? [View article]
Sorry, the last link didn't work properly. Here is the link to the chart showing technicals and fundamentals for the index of 26 US homebuilders - tradesystemguru.com/co...
Housing Market Tracker - False Bottom for Homebuilders? [View article]
This latest homebuilder rally is very similar to the last bear rally that sucked in investors between July 06 and April 07. It turned out to be false because the fundamentals continued to deteriorate.
Here is a chart of the homebuilders index of 26 builders (VectorVest) as it looked as of the week of February 8 (see tinyurl.com/2e7794 ). Given that sales and home prices continue fall across the country and the economy is weakening, I do not see any mechanism that could boost homebuilder fundamentals anytime soon... In other words, this rally stands the same chance of being sustained as the last one... Matt Blackman - Host TradeSystemGuru.com
Actually, the demographic bubble within a bubble to which you refer is one of the major causes (along with cheap money and misguided fiscal policy) of the creation of the greatest number of asset bubbles in history. But what goes up, does eventually come down. According to the work of Harry Dent, Daniel Arnold and others, the biggest spending sector of the economy (45-54 year olds) which are drivers of an economy peak in 2009. Studies show that as these individuals pass 50, spending starts to drop and since 70% of our economy is driven by consumer spending, this is a big problem. Each time this has occurred in the past (1929-30 and 1966-68 in the US and 1990 in Japan) a depression has followed (see Figure 2 tinyurl.com/3yf9rk ). Given that we are now experiencing the popping of the biggest inflation adjusted real estate bubble in history, this baby boom mass exodus has the potential to push this thing over the edge of the abyss. Imagine mass demand switching from big homes to small single level rancher style homes and condos and you begin to get the picture. Matt Blackman - Host TradeSystemGuru.com
Analysts See Dow Rising Sharply in 2008 [View article]
I wonder what the analysts' track record is? They rarely mention that in such forecasts. Correct me if I'm wrong but wasn't Abbey Cohen bullishly optimistic in January 2000 as the market was peaking and didn't Glassman predict a Dow of 36,000 in 1999? And who can forget Henry Blodget?
I would bet that fundamental analysts have a similar accuracy to economists and here is a report on their accuracy at predicting economic slowdowns...
"In 1929, days after the stock market crash, the Harvard Economic Society reassured its subscribers: “A severe depression is outside the range of probability” In a survey in March 2001, 95% of American economists said there would not be a recession, even though one had already started. Today, most economists do not forecast a recession in America, but the profession's pitiful forecasting record offers little comfort." – Economist November 15.
Housing Market Tracker - Home Sales/Price Review [View article]
There continues to be a lot of optimism out there promoted by the likes of the National Association of Realtors and other industry cheerleaders that the worst of the market is over. Case in point - in the NARs most recent news release on Pending Home Sales, chief economist and head cheerleader Lawrence Yun made the following comments, "“although there could be some minor slippage in the first quarter, existing-home sales should hold in a narrow range before trending up,” he said. The group said it expects existing home sales to increase to 5.7 million in 2008 up from the most recent annual estimate of 5 million homes sold (November 2007).
Just for fun, we looked back at the NAR’s pending home sales report one year ago (Jan 4/07). On a year-over-year basis, November pending home sales had fallen 10.2% from November 2006 but that didn’t stop then chief economist David Lereah from claiming that the narrowing [in November from previous monthly reports] was a significant factor. “Because there is a stronger parallel between changes in the index from a year ago and the actual pace of home sales in coming months, the index is pointing toward fairly stable home sales in the near future,” Lereah said in the January 4, 2007 report. “That is another indicator that home sales likely bottomed-out in September [2006].” (See tinyurl.com/388uku ) Not only was his analysis way off the mark (existing home sales dropped another 20% over the next year), it sounds eerily familiar to that of his successor in the most recent statement. The cruel truth is that property markets around the globe have just come through the biggest bubble in history (see inflation-adjusted home price chart tradesystemguru.com/co... ) and such bubbles have never ended quickly or happily.
Housing Market Tracker - 'Relisting' Could Skew Housing Data [View article]
Not quite sure why the media and market focuses single-mindedly on housing starts when permits are a far more reliable leading metric. First, they are less subject to the vagaries of weather, attempts by builders in slow markets keep employees working and the last minute rush to use permits in slow markets before they expire.
(See chart and discussion this Sunday at tradesystemguru.com/co.../ on )
However, the real kicker in this market will be the drops we see once incentives like under the table kick backs in existing homes and builder incentives that currently represent 20% of the purchase price in new home sales. They do not nor should they be included in the purchase price and could be skewing home prices upward across the board (and across the nation) by 10% or more. Unless this time is different, we will see incentives dwindle as the number of foreclosures hit the market with no incentives attached. Incentives have skewed all home price indexes upward (see seekingalpha.com/artic... )
Which is the Most Accurate Home Price Index? [View article]
Pending Home Sales Plummet 24.2% [View article]
I have found the Case-Shiller Home Price Index to be a much more useful metric (see tradesystemguru.com/co... ). BTW, even the NAR admits that year-over-year results are more reliable than month-over-month statistics so the 24% drop in a year is something to pay attention to... (See tradesystemguru.com/co... )
I would love to know how Yun can tell the public with a straight face that the existing home sales will bottom where they are now (4.9 million) and then surge to 5.8 million in the second half of the year when every metric (sales, pending homes, prices, inventories and the rate of change in GDP) are saying otherwise....
Some Color on Toll Brothers Earnings/Guidance [View article]
Given that we are just coming off the ugly end of the biggest real estate bubble in history, not sure how anyone with the facts can think this is the ultimate bottom. Unfortunately, that is still a long way off.
Emerging Markets: The More 'Uncoupled', the Better [View article]
Housing Market Tracker - False Bottom for Homebuilders? [View article]
Housing Market Tracker - False Bottom for Homebuilders? [View article]
Here is a chart of the homebuilders index of 26 builders (VectorVest) as it looked as of the week of February 8 (see tinyurl.com/2e7794 ). Given that sales and home prices continue fall across the country and the economy is weakening, I do not see any mechanism that could boost homebuilder fundamentals anytime soon... In other words, this rally stands the same chance of being sustained as the last one...
Matt Blackman - Host TradeSystemGuru.com
A Housing Bubble Within a Bubble [View article]
Matt Blackman - Host TradeSystemGuru.com
Analysts See Dow Rising Sharply in 2008 [View article]
I would bet that fundamental analysts have a similar accuracy to economists and here is a report on their accuracy at predicting economic slowdowns...
"In 1929, days after the stock market crash, the Harvard Economic Society reassured its subscribers: “A severe depression is outside the range of probability” In a survey in March 2001, 95% of American economists said there would not be a recession, even though one had already started. Today, most economists do not forecast a recession in America, but the profession's pitiful forecasting record offers little comfort." – Economist November 15.
Housing Market Tracker - Home Sales/Price Review [View article]
Just for fun, we looked back at the NAR’s pending home sales report one year ago (Jan 4/07). On a year-over-year basis, November pending home sales had fallen 10.2% from November 2006 but that didn’t stop then chief economist David Lereah from claiming that the narrowing [in November from previous monthly reports] was a significant factor. “Because there is a stronger parallel between changes in the index from a year ago and the actual pace of home sales in coming months, the index is pointing toward fairly stable home sales in the near future,” Lereah said in the January 4, 2007 report. “That is another indicator that home sales likely bottomed-out in September [2006].” (See tinyurl.com/388uku ) Not only was his analysis way off the mark (existing home sales dropped another 20% over the next year), it sounds eerily familiar to that of his successor in the most recent statement. The cruel truth is that property markets around the globe have just come through the biggest bubble in history (see inflation-adjusted home price chart tradesystemguru.com/co... ) and such bubbles have never ended quickly or happily.