No one has gone out of business yet, and the inventory of 9 months is an awful lot. Lennar stated today that their margins have declined to 13% from 25% a year ago. That really doesn't sound good to me. I wouldn't expect a turnaround till at least 2008.
I agree that you buy fear and sell greed, but the homebuilders scream apathy right now. No one's shorting them because the've already fallen alot and there's no point in being long because the industry won't recover for another 5 years. If you want to know what homebuilders will do for the next 5 years, look at CSCO starting from where it bottomed out in Apr 2001. It went up eventually, but it was dead money long and short for 3 years.
We are 7-10 years away from a real housing boom unless immigration forces prices higher. Something like that happened in the 70's in California. There were a lot of illegals coing in at the time [it was not on anybody's radar at the time but they were here] and the boomers all were buying their first houses early in the 70's and many bought move-up houses later in the decade as well. Housing boomed in a rising interest rate environment for awhile. I don't see any "perfect storm" like that currently. Builders could bounce out of oversold territory though if it is short term trading you are looking for, I have no real clue about that.
no one is going to make much building homes until resale inventories thin out. Right now year or two old homes are significantly cheaper than new. The builders are now attempting to build better homes. Saying, your new home will cost less to operate. I told my wife. She said what am going to pay 100,000 more to save 20 bucks a month?
You know me. Im into the chart. I say its not a buy until at least this chart hits 14. You can see where it hit a peak, then bottomed in 2006 and then came the dead cat bounce. Now we are sinking to lower levels. Look at the chart and use common sense. I think there is a lot of room to go lower from here before the buy/hold of homebuilders can begin. Actually, I think some of the smaller cap names in this homebuilder index will probably go bankrupt in 1-2 years time. I would stick to the larger caps that have been around for at least 10, but preferably more, years.
Agree with this. Easy calling the bottom in housing stocks - the numbers from the reliable NARM are still bad and these companies used to be 5-10$ before the recent runup. Things aren't looking better yet - I'd wait off until we get some good news and the inventories stop looking so bloated.
I actually work in the lumber industry as a wholesaler and I can tell you that the bottom is still not here. I am getting a LOT of calls from people every day looking for wood and I can't quote them because it's not available. That's not because it's selling....it's because the mills aren't producing it. Everyone is holding back on producing lumber right now because the demand for it isn't really out there. Pope & Talbot (POP) is a mill in my area and they're cutting back on labor to try and salvage what they can for profits. It's bad.......REALLY bad. Guys in the office I work at are down 20% - 40% from what they were earning a few years back. I don't think it's quite time yet to jump back into the housing sector. I'm saying late next year or 2009 before the turnaround happens. You can buy and hold but you'll be holding for a looooooong time.