WC Whiner

Homebuilder Stocks Not The Bargain They Seem

Nice piece, though I caution that I share your view of the likely path of homebuilder earnings. That said, like you I currently have no position, though I have shorted the group, covered, shorted and covered again this calendar year.

Earlier this year I made my own version of an affordability index. The chart is at www.bignose.org/~wcw/mortgage.pct.med... Mortgage payments at fixed rates on an OFHEO-index home as percentage of median four-person income are at twenty year highs, so either we're in a new era of housing pricing (possible, but not my bet) or something has to give. Since I doubt rates are headed back down and I am quite certain incomes are not about to balloon, my bet's on prices heading down instead.

Also worth noting: for-sale inventory as a percentage of owner-occupied housing is at forty-year highs. Cf www.bignose.org/~wcw/forsaleonly.sd.2...

Is it Time to Buy US Homebuilder Shares?

I covered steadily on the way down and was out completely by.. lessee.. 7/17. Since like you I notice that housing prices themselves have not dropped, and given the data on sales and inventories, I took a small short during Friday's AM rally.

I actually hope you're right about a short-term bounce, because the higher homebuilder prices (in the absence of any change in direction in the hard numbers or rates), the more comfortable I am getting short a little more.

Cf for-sale inventory at www.bignose.org/blog/i... and mortgage-costs-vs-inco... at www.bignose.org/blog/i...