Over the course of this year I have made a good amount of money targeting the Homebuilding sector for opportunities on the short side. I feel that we are in a recession that is likely to get worse before it gets better. Real Estate and the stock market have been twin bubbles, each fueling the other. Because interest rates have remained at historically low levels, however, for the most part the real estate bubble has remained in tact despite the destruction in the value of stocks. However, as the economy continues to slow down new home sales will as slow as well. We already have a situation in America in which the dream of owning a new home is just that for most of the middle class in our large metro areas. New home prices have risen to levels that are simply unaffordable for the majority of the potential market. Combine this with mounting debt loads, uncertainty about the future due to job loss, terrorism and war you have a situation ripe for correction. Given this, I don't think there is any way under heaven or over hell that home builders support values near their current levels. Add to this the fact that all of the leadership stocks in the group are forming big picture (weekly and monthly) short sale patterns and you have a situation ready to occur that will see the mighty fall again. Below is a list of a few stocks in the sector that I feel have the best chart patterns, which justify looking to take short positions in the stocks should they move much lower. BZH, DHI, RYL, NVR (I like this one the best) Brandon
Or market rebounds in 4th quarter and BZH trades up to 9.5 times next years earnings (or $100 share).
I agree homebuilders puting in their top. I would only short the rallies into key resistance.. avoid shorting weakness with these guys. --MIKE
every now and then i see a $3 spread - if you get caught on the wrong side of that one - you better bend over . i like him though i've traded NVR for more than $1/SH for the year
Watch the chart on NVR is becomes somewhat obvious which way it will move--the only problem is the specialist screws you on any fill and they will trade right around you or penny you. Also, TOL and MTH can be added the list.
NVR was an outstanding short off 378.00, This one last week spiked down 10 points and up 13 points in an hour. So new Traders Stay clear. MMM, we took short off 120.00, Maybe this one has some more downside slip off 111.00, Part of the builder Group. Let some pop back up imo, only... NVR 302.95 -6.05 -1.96% 80600 16:00 Bid/Ask(0.01-935.98) Day Lo-Hi(301.51-311.89) Yr Lo-Hi(133.00-391.00) MMM 112.55 -3.20 -2.76% 3.05M 16:04 Bid/Ask(0.01-116.40) Day Lo-Hi(111.81-115.76) Yr Lo-Hi(91.70-130.60)
I thought new home sales were down. Maybe for this month they were back up. BTW, what is the historic earnings multiple for this sector? This discussion is an excellent one and actually has taken place in other words elsewhere on ET. There is a scenario developing that we have not seen and that is the suburban ghetto. This new term is used to describe the abundance of newer homes that are in foreclosure, empty, and rundown BECAUSE of low interest rate plans offered. Foreclosures et al are at record levels. That is a fact. The very people who have been and are being laid off are the ones losing their homes. It is of little consequence to these people studies have shown. Most were able to get in "no money down" or "sweat equity" and had low first year and second year ARM's. Counting on receiving raises and bonuses that never materialized, and even counting on having a job, these people are more than happy to just walk away from their mortgage. Thanks for the symbols of homebuilders. CTX is another one.
I've also been bearish on this sector for all the usual reasons. But I'm not Midas. There are some bull cases. Immigration was reported at much higher than expected levels in the 2000 census. People continue to live longer i.e. less supply from dying condo dwellers, and for every over built area like Dallas, Atlanta, and Vegas, there is a "built out" metro with little room to grow such as NYC, SD,SoFla,and Seattle. While this run up in home prices does remind me of the NASD bubble, remember that things can go pretty high in your face, before the day of reckoning occurs.
<i>NVR was an outstanding short off 378.00, This one last week spiked down 10 points and up 13 points in an hour. So new Traders Stay clear. </i> Thats like saying you should stay clear of MSFT because it had a range of $1.90 on friday. Its all relative to the risk you are taking. If you are in NVR, you should be trading smaller size then if you are in other stocks, anyone who does not undersand that has no business even trading, new or otherwise. Brandon