Data don’t show a housing boom but a slow and halting recovery is still good news
Investors looking for a breakout in housing sales are disappointed with the data on home sales and housing starts released today and yesterday. That’s why shares of homebuilders such as Lennar (LEN) are down—by 2.5% in this instance—today. The recent huge rally in stocks in the sector has left them vulnerable to profit taking on anything less than stellar news.
It’s not, however, that the news in the last two days is bad. It does indeed argue for a recovery in the sector. But that recovery isn’t going to be a moon shot but rather a slow and halting recovery. For the patient, a sell off here on disappointment that the recovery isn’t going to be faster would be a chance to get into a sector that indeed does seem to be on the mend. Read more
April slowing in housing starts is bad news but not a surprise
I’m seeing headlines calling the 11% drop in housing starts announced this morning (May 17) in April from March “surprising,” but I don’t see why. Flooding and tornadoes in the South shut down construction sites in a big swath of states this spring. (April 2011 was the 10th wettest April since the start of records in 1895. The 875 tornadoes reported in the month are a record.) Housing starts in the south fell 23% from March levels.
But whether you’re surprised or not, there’s no doubt that the housing industry continues to struggle two years after the current economic recovery started. Housing starts in April came in at a 523,000 annual rate. That’s 11% below the annualized rate for March and considerably short of the 569,000 rate forecast by economists, according to Bloomberg.
There’s no quick turnaround in the cards either. Read more
The happiness of “early” and the sadness of “too early”: How to maximize your portfolio’s happiness
There’s early. And then there’s too early.
Early is buying Apple (AAPL) on October 6, 2008 at $98.14 and having to wait until March 2009—six months–before the stock moves up. And up. And up. On March 6, 2009 Apple closed at $85.30. A year later on March 5, 2010 the shares sold for $218.95.
Early is happy.
Too early is buying home builder DR Horton (DHI) in July 2009. You thought long and hard before you moved. You didn’t buy on the first bottom in the summer of 2008 or even in early July 2009. You wanted to see signs the sector had bottomed and started to recover. The end of July rally seemed to promise that and so you bought at $11.17 on July 29, 2009. Now it’s February 18, 2011 and the shares trade at $12.77. The 14% gain doesn’t seem paltry until you remember that it’s your gain over 18 months. And that DH Horton shares still haven’t actually taken off as you’d hoped.
Too early is disappointed.
And it can be even worse—if you decide you can’t wait any longer and just have to sell. Then there’s a good chance that you’ve spent months sitting on dead money before taking a loss.
It’s clear why we buy early—we want to get a bargain price before everyone else piles on. And it’s clear why we buy too early. We don’t want to pass up a bargain—and lose our chance—so we jump in too soon.
Are there any rules that might separate the “early” from the “too early” and let us maximize our investing happiness and minimize our investing disappointments? Read more
Existing home sales bring (some) good news for the U.S. economy
I missed reporting on this piece of economic good news last week. And it’s an important piece of data since it feeds into my belief that the U.S. economy is strengthening and that the U.S. market is the place to be in the first half of 2011.
Existing home sales for December came in at an annualized 5.28 million. That was a big pick up from the 4.7 million annualized rate in November. Economists were expecting sales at an annualized rate of 4.8 million.
I wouldn’t bet the college money (well, not all of it, anyway) on this number—after all just a couple of days ago, on January 19, we got lower than expected numbers on housing starts for December. At the time some analysts blamed the disappointment on worse than normal December weather. Well, maybe.
Existing home sales have now climbed for three straight months and December sales were the strongest since August 2007—if you throw out the months when the federal government gave subsidies to homebuyers.
There’s good news and bad news in the numbers going forward. Read more
Subsidies end and housing starts plunge even more than expected
Hard to find a silver lining in this data.
Housing starts in May fell to a 593,000 annual rate, according to numbers released this morning, June 16, by the Department of Commerce. That was a 10% drop from April’s annual rate of 659,000. The April rate itself was revised downward from 672,000. The drop was the biggest since March 2009.
Building permits, an indicator of future housing starts, fell to an annual rate of 574,000. That’s a one-year low.
Economists had been expecting that housing starts and building permits would both fall because government subsidies to home buyers expired at the end of April. Under the program home buyers had to sign a contract by the end of that month to qualify for a credit of up to $8,000.
But they hadn’t expected starts and permits to fall quite this sharply. Read more
