I'm thinking some of these names may be ripe for a couple points ahead of next week's meeting... In particular I'm thinking HOV and TOL... Any thoughts?
Here is the question, if the Fed cuts rates does it suddenly make the housing market look so nice and sweet. Still tons of supply and falling housing prices and a .25 rate cut will not spur any demand going into Fall season since mortgage rates are already low. I do not see the rate cut changing the negative fundamentals in the housing sector.
You are correct in that a rate cut does nothing to change the dismal fundamentals. I guess people enjoy trying to catch falling knives. Not a day goes by that somebody here isn't recommending buying the builders.
I agree that a 25bps cut won't do anything to spur housing demand, however don't you think the possibility of a 50bps cut will lead to speculators to go long and a good chunk of shorts to cover? I'm going to watch these names very closely and will in all likelihood enter a couple names sometime this week.
Explain to me how even 100 point cut would mark a turn around in the housing market. The people that can only afford to buy with a liitle lower rate than what we already have cannot qualify for the loans. They never really could and that is why we are at this juncture.
HB's are pricing in a high chance of Bankruptcy. A big rate cut will not make HB's profitable over the next 18 months, but may be enough to stabilize the situation and make people think real estate is not going to fall 30% and that HB's are not going to go bankrupt. With bankruptcy risk removed, many HB's could rally 30%+ as some are already trading at 1/3 or 2/5ths of book value.