New Home Sales
Updated through the most-recent data released on April 24, 2008.
The Current Situation
This has been the worst housing recession as far back as the Census Bureau has data, yet our economy grew steadily through the first two years of decline. Only now in the third year have we fallen into a general recession. While it is fashionable to say that housing is not such a large part of the economy any more, we have seen that it is indeed still a huge factor - especially to the financial system.
In the second half of 2006, after the stocks of home-builders crashed, (see the HGX and the XHB) there were stories in the news about how the “smart” money was buying the home-builders. Bill Gates’s name was mentioned, Jim Cramer had a pile of sand on the floor of the set of his TV show where he “drew a line in the sand” on the home-builders, etc. Buying the home-builders became very fashionable.
Talk about bad calls! In the long run anyway…
In March, Jim Cramer said that the home-builders were a buy because the rate of collapse had slowed. But the rate of collapse turned ugly again in April. The charts have yet to turn around and the recession has only begun. People without jobs can’t buy houses, and the bankers, having blown all their money in real-estate speculation, can’t make loans to hardly anybody anyway.
With plenty of new houses in inventory, layoffs, and tight credit, the possibility for another leg-down in these stocks seems pretty good.
Next Update
The Census Bureau will release its next estimate at 10am EST on Tuesday, May 27, 2008.
About the Data
On or around the 26th of each month, the Census Bureau publishes an estimate of how many new houses will be sold this year. I plug that number into the 2008 bar on the second chart, and then update the growth percentage on the top chart.
Disclosure
I am not long or short the home-builders. I wouldn’t be a opposed to picking up some XHB when the withholding data stabilizes though. It might be good for a triple coming out of a recession.
