Best of the Week
Most Popular
1.Are UK Savings Interest Rates Finally Starting to Rise? Best Cash ISA 2017 - Nadeem_Walayat
2.Inflation Tsunami - Supermarkets, Retail Sector Crisis 2017, EU Suicide and Burning Stocks - Nadeem_Walayat
3.Big Moves in the World Stock Markets - Big Bases - Rambus_Chartology
4.The Next Financial Implosion Is Not Going To Be About The Banks! - Gordon_T_Long
5.Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - Nadeem_Walayat
6.Trump Ramps Up US Military Debt Spending In Preparations for China War - Nadeem_Walayat
7.Watch What Happens When Silver Price Hits $26...  - MoneyMetals
8.Stock Market Fake Risk, Fake Return? Market Crash? - 2nd Mar 17 - Axel_Merk
9.Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral? - Nadeem_Walayat
10.Why Gold Will Boom In 2017 - James Burgess
Last 7 days
Political Week Presurres US Stock Market - 25th Mar 17
London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - 25th Mar 17
Will Washington Risk WW3 to Block an Emerging EU-Russia Superstate - 25th Mar 17
Unaccountable Military Industrial Complex Is Destroying America and the Rest Of The World Too - 25th Mar 17
Silver Mining Stock Fundamentals - 24th Mar 17
A Walk Down the Dark Road of Bad Government - 24th Mar 17
Is Stock Market Flash Crash Postponed Until Monday? - 24th Mar 17
Stock Market Bubble and Gold - 24th Mar 17
Maps Of Past Empires That Can Tell Us About The Future - 24th Mar 17
SNP Independent Scotland's Destiny With Economic Catastrophe, the English Subsidy - IndyRef2 - 24th Mar 17
Stock Market VIX Cycles Set To Explode March/April 2017 – Part II - 23rd Mar 17
Is Now a Good Time to Invest in the US Housing Market? - 23rd Mar 17
The Stock Market Is a Present-Day Version of Pavlov’s Dog - 23rd Mar 17
US Budget - There’s Almost Nothing Left To Cut - 23rd Mar 17
Stock Market Upward Reversal Or Just Quick Rebound Before Another Leg Down? - 23rd Mar 17
Trends to Look Out For as a Modern-day Landlord - 23rd Mar 17
Here’s Why Interstate Health Insurance Won’t Fix Obamacare / Trumpcare - 23rd Mar 17
China’s Biggest Limitations Determine the Future of East Asia - 23rd Mar 17
This is About So Much More Than Trump and Brexit - 23rd Mar 17
Trump Stock Market Rally Over? 20% Bear Drop By Mid Summer? - 22nd Mar 17
Trump Added $3 Trillion in Wealth to Stock Market Participants - 22nd Mar 17
What's Next for the US Dollar, Gold and Stocks? - 22nd Mar 17
MSM Bond Market Full Nonsense Mode as ‘Trump Trades’ Unwind on Schedule - 22nd Mar 17
Peak Gold – Biggest Gold Story Not Being Reported - 22nd Mar 17
Return of Sovereign France, Europe’s Changing Landscape - 22nd Mar 17
Trump Stocks Bull Market Rolling Over? You Were Warned! - 22nd Mar 17
Stock Market Charts That Scream “This Is It” - Here’s What to Do - 22nd Mar 17
Raising the Minimum Wage Is a Jobs Killing Move - 22nd Mar 17
Potential Bottoming Patterns in Gold and Silver Precious Metals Stocks Complex... - 22nd Mar 17
UK Stagflation, Soaring Inflation CPI 2.3%, RPI 3.2%, Real 4.4% - 21st Mar 17
The Demise of the Gold and Silver Bull Run is Greatly Exaggerated - 21st Mar 17
USD Decline Continues, Pull SPX Down as well? - 21st Mar 17
Trump Watershed Budget - 21st Mar 17
How do Client Acquisition Offers Affect Businesses? - 21st Mar 17
Physical Metals Demand Plus Manipulation Suits Will Break Paper Market - 20th Mar 17
Stock Market Uncertainty Following Interest Rate Increase - Will Uptrend Continue? - 20th Mar 17
Precious Metals : Who’s in Charge ? - 20th Mar 17
Stock Market Correction Continues - 20th Mar 17
Why The Status Quo Is Under Increasing Attack By 'Populist People Power' - 20th Mar 17
Why the SNP WILL Destroy Scotland, Exit UK Single Market for EU - IndyRef2 - 19th Mar 17
Crypto Craziness: Bitcoin Plunges on Fork Concerns, Steem Skyrockets and Dash Surges Above $100 - 19th Mar 17
What ‘Ice-Nine’ Means for Your Money - 19th Mar 17
Stock Market 4 Year Cycle - 18th Mar 17

Market Oracle FREE Newsletter

Elliott Wave Trading

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