Housing Holding Up Despite Bad News

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Includes: KBH, XHB
by: David Fry

The interesting thing about the Homebuilders' ETF (NYSEARCA:XHB) is that it isn’t making new lows (yet).

Given the torrent of bad news, from back-dating stock options at KB Home (NYSE:KBH), to poor earnings and outlooks, one would think price of XHB would be much lower.

That could still be in the cards, and soon.

Of course, slow housing starts and no hurricanes so far are pressuring lumber and other associated markets.

Fed Governors continue to talk a good game on inflation while expressing little concern about the housing market and attendant consumer spending. Perhaps there’s little they can do about too many houses without serious price adjustments.

When I was in the States last week I was surprised at the number of for-sale signs littering the landscape. The primary area we visited consisted of lakefront vacation homes where property seldom changes hands. Now many spec homes have been built and even some (gasp!) condos — most were for sale and sat vacant. Prices were marked-up to astronomical levels with sellers reluctant to cut prices and mighty ticked-off if that was suggested.

That’s typical of real estate when markets stink.