Best of the Week
Most Popular
1.The Brexit War! EU Fearing Collapse Set to Stoke Scottish Independence Proxy War - Nadeem_Walayat
2.London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - Nadeem_Walayat
3.The BrExit War, Game Theory Strategy for What UK Should Do to Win - Nadeem_Walayat
4.Goldman Sachs Backing A Copper Boom In 2017 - OilPrice_Com
5.Trump to Fire 50 US Cruise Missiles To Erase Syrian Chemical Attack Air Base, China Next? - Nadeem_Walayat
6.US Stock Market Consolidation Time - Rambus_Chartology
7.Stock Market Investors Stupid is as Stupid Goes - James_Quinn
8.Gold in Fed Interest Rate Hike Cycles- Zeal_LLC
9.The BrExit War - Britain Intelligence Super Power Covert War With the EU - Nadeem_Walayat
10.Marc Faber: Euro to Strengthen, Dollar to Weaken, Gold and Emerging Markets to Outperform - MoneyMetals
Last 7 days
Le Pen Shifts Political Landscape- The Rise of New French Gaullism  - 24th Apr 17
IMF Says Austerity Is Over - Surplus or Stimulus - 24th Apr 17
EURUSD at a Critical Point in Wave Structure - 23rd Apr 17
Stock Market Grand Super Cycle Overview While SPX Correction Continues - 23rd Apr 17
Robert Prechter Talks About Elliott Waves and His New Book - 23rd Apr 17
Le Pen, Melenchon French Election Stock, Bond and Euro Markets Crash - 22nd Apr 17
Why You Are Not An Investor - 22nd Apr 17
Gold Price Upleg Momentum Building - 22nd Apr 17
Why Now Gold and Silver Precious Metals? - 22nd Apr 17
4 Maps That Signal Central Asia Is at Risk of War - 22nd Apr 17
5 Key Steps For A Comfortable Retirement From Former Wall Street Trader - 22nd Apr 17
Can Marine Le Pen Win? French Presidential Election Forecast 2017 - 21st Apr 17
Why Stock Market Investors May Soon Be In For A Rude Awakening - 21st Apr 17
Median US Household’s Wealth Has Declined by 40% Since 2007 - 21st Apr 17
Silver, Platinum and Palladium as Investments – Research Shows Diversification Benefit - 21st Apr 17
U.S. Stock Market and Gold, Post Tomahawks and MOAB - 21st Apr 17
An In Depth Look at the Precious Metals Complex - 20th Apr 17
The Real Story of China’s Strong First-Quarter Growth - 20th Apr 17
3 Types Of Life-Changing Crisis That Make You Wish You Had Some Gold - 20th Apr 17
The Truth is a Dangerous Thing - 20th Apr 17
2 Choke Points That Threaten Oil Trade Between Persian Gulf And East Asia - 20th Apr 17
Gold’s Next Downside Target Is Around $700… Even if It Breaks Up First - 19th Apr 17
SPX May be Completing its Corrective Pattern - 19th Apr 17
Silver Production Has “Huge Decline” In 2nd Largest Producer Peru - 19th Apr 17
Soothing East Asia's Nerves as Trump's Administration Reaffirms US Power in Asia-Pacific - 19th Apr 17
The Brexit War - Article 50 Triggered, General Election 2017 Called - Let the Games Begin! - 19th Apr 17
Plungers Big Trade - The Oil Short - 18th Apr 17
The Smart Money Is Piling Into Regenerative Medicine - 18th Apr 17
If You Invest In Stocks Now, Expect No More Than 3% Returns In The Next 20 Years - 18th Apr 17
Maps That Explain Wars In The Middle East And North Africa - 18th Apr 17
Theresa May Calls Snap BrExit UK General Election Capitalising on Crippled Labour Party - 18th Apr 17
Is US Economy at the Cusp of the Next Recession? or Maybe Worse? - 18th Apr 17
US Housing Market Mortgage Delinquency Rates Increase & 3X ETFs - 17th Apr 17
Trump US North Korea First Strike Smoke and Mirrors, China is the Real War Target! - 17th Apr 17
Now Is The Time To Invest In Canada’s Marijuana Boom - 17th Apr 17
History of the Post WWII Crude Oil Price From a Technical Perspective - 17th Apr 17
Stock Market Bounce Coming? - 17th Apr 17

Market Oracle FREE Newsletter

50+ Global Markets. Today's Top Opportunities. (April 12-20)

What Homebuilding Stocks Trying to Tell Us After 20% Plunge?

Housing-Market / Housing Stocks Sep 26, 2013 - 02:22 PM GMT

By: Profit_Confidential

Housing-Market

Michael Lombardi writes: The U.S. housing market is “hot;” home prices are going up and up. At least that’s what the mainstream’s saying.

The S&P Case-Shiller 20-City Composite Home Price Index, considered a key indicator of the U.S housing market, increased to 159.18 in July. In June, it stood at 158.20. Since the beginning of the year, the index of home prices in 20 major cities in the U.S. economy has increased by roughly 7.5%. (Source: Federal Reserve Bank of St. Louis web site, last accessed September 24, 2013.)


Why isn’t this bullish news pushing up homebuilder stocks? Or more importantly, what are those leading indicator stocks trying to tell us by collapsing 20% since their May high?

As I continue to write in these pages, I am skeptical of the rise in home prices in the U.S. housing market. I believe the rebound in the housing market activity is a direct result of the Federal Reserve’s easy money and nothing else.

To have real growth in the housing market, you need buyers who are going to actually live in the homes they purchase. This analogy can also be used for other commodities. For example, to assess the condition in the copper market, if you see increased buying by companies that make copper products, this suggests there’s demand. On the contrary, if you see speculators, then you can assume they will bail as soon as they make some money on their trade.

The U.S. housing market has accumulated too many speculators. It is well documented in these pages how institutional investors are buying homes, fixing them up, and then renting them out.

For the housing market, one key indicator I follow is the activity of first-time home buyers—and they’re just not there in this recovery.

Take existing-homes sales for August, for example. First-time home buyers only accounted for 28% of all the sales in the housing market for that month. In July, they accounted for 29%. A year ago, they made up 31% of the sales. (Source: National Association of Realtors, September 19, 2013.) The number of first-time home buyers entering the housing market continues to fall—a bad omen for the recovery. On average, first-time home buyers should account for 40% of all existing-home sales.

And mortgage rates have been rising. As rates increase, it makes homes less affordable for many buyers.

In September the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), which tracks the sentiment of homebuilders, was unchanged after hitting an almost eight-year high. The chief economist at the National Association of Home Builders (NAHB), David Crowe, said, “Following a solid run up in builder confidence over the past year, we are seeing a pause in the momentum as consumers wait to see where interest rates settle and as the headwinds of tight credit, shrinking supplies of lots for development and increasing labor costs continue.” (Source: “Builder Confidence Unchanged in September,” National Association of Homebuilders, September 17, 2013.)


Chart courtesy of www.StockCharts.com

Homebuilder stocks, as the chart above illustrates, are down a little more than 20% since their May peak. I would not be surprised to see them decline further. As an investor, you know the stock market is a forward-looking animal. Homebuilder stocks declining so rapidly show investors don’t want to own them. And in the past, the action in homebuilder stocks has always led the direction of the housing market in the U.S. So next time you hear housing is making a “comeback,” remember what you just read here. All is not as rosy as it seems for the housing market.

Michael’s Personal Notes:

Boy, they just don’t like gold bullion. The gold bears are getting excited over every negative movement in gold prices. As soon as the precious metal’s prices decline a little, we start to hear chants, like “Gold bullion is useless.” Sadly, most of the market is too focused on the short term—the daily, weekly, or even monthly fluctuations—which is wrong.

I keep my eye on the long-term picture.

Before going into any details, please look at the chart below of gold bullion prices since 1970.


Chart courtesy of www.StockCharts.com

Looking at this chart, an observation one can make is that gold prices are known to have price swings, meaning they go up significantly and then come back down.

From 1970 to 1974, gold bullion prices increased by more than 440%; then in November of 1974, they started their decline. The precious metal’s prices found a bottom in 1976, and in that period, prices dropped more than 45%. (Source: “Past Data,” StockCharts.com, last accessed September 24, 2013.)

Moving forward, in August of 1976, we saw the beginning of another bull run in gold prices. This rise continued on until the beginning of 1980. In this period, the precious metal’s prices increased by more than 705%. From there, until June of 1982, gold bullion prices declined more than 63%.

From then on, the price of gold moved sideways for a while, but there were heavy fluctuations in between.

Then came 2001, when the precious metal found a bottom and started to go higher, increasing 291% until March of 2008. After this time, we saw a decline of almost 30% in a very short period.

Following this, another bull run was born. From then on, gold bullion prices increased about 170% until 2011, when the price hit $1,900 an ounce.

Since then, we have seen scrutiny. Gold prices made a low at around $1,200 an ounce—or a decline of about 35%—not too long ago.

Dear reader, the moral of the story is that the fluctuation we have seen in gold bullion prices is nothing new. My opinion? When the bears say gold bullion prices are in a “bubble,” they shouldn’t be trusted. We have seen all this in the past. The gold bears were wrong then; they are going to have the same fate again.

I continue to be bullish on gold bullion for the following reasons:

Central banks are still printing paper money, as their economies are still in trouble. They are fixated on printing to bring down the value of their currencies. But gold bullion is a global currency. To give you some idea about their sentiment, the president of Switzerland’s central bank, Thomas Jordan, said, “At the moment there’s no reason to discuss an exit of the cap—the minimum exchange rate is still very, very important.” (Source: “SNB Says Franc Ceiling ‘Essential’ to Protect Economy,” Bloomberg, September 19, 2013.) In other words, the central bank plans to keep printing its own currency. Eventually, all this paper money printing (with nothing backing the paper) will catch up with world central banks in a bad way.

Meanwhile, demand for gold bullion worldwide is increasing. The longer gold bullion prices remain stressed, the bigger the eventual impact on the supply side.

Source -http://www.profitconfidential.com/real-estate-ma...

Michael Lombardi, MBA for Profit Confidential

http://www.profitconfidential.com

We publish Profit Confidential daily for our Lombardi Financial customers because we believe many of those reporting today’s financial news simply don’t know what they are telling you! Reporters are trained to tell you the news—not what it can mean for you! What you read in the popular news services, be it the daily newspapers, on the internet or TV, is the news from a “reporter’s opinion.” And there’s the big difference.

With Profit Confidential you are receiving the news with the opinions, commentaries and interpretations of seasoned financial analysts and economists. We analyze the actions of the stock market, precious metals, interest rates, real estate and other investments so we can tell you what we believe today’s financial news will mean for you tomorrow!

© 2013 Copyright Profit Confidential - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife