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US HomeBuilders Thread


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US HomeBuilders Thread

 

Opening a new thread for the US homebuilders.

Many of them are now break down from stage 3 to stage 4 - an ideal time to start shorting them.

 

This is a volatile sector - we saw how they lost 85% of their value between 2005-2008, and then how they have rallied to triple your money in the last 2 years.

Get on the right side of the market and the rewards can be huge.

 

Sector components:

http://bigcharts.mar...asp?symb=DJUSHB

Sector Chart: http://bigcharts.mar...DJUSHB&x=46&y=2

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Bet shorting candidate charts imo. All these should be shorted/added on breaks below the recent lows.

 

BRP:

BRP.jpg

 

 

 

DHI

DHI.jpg

 

 

 

GFA (Brazilian homebuilder, apparently):

GFA.jpg

 

 

HOV:

HOV.jpg

 

 

 

KBH:

KBH.jpg

 

 

 

LEN:

LEN.jpg

 

 

 

MDC:

MDC.jpg

 

 

 

MHO:

MHO.jpg

 

 

 

MTH:

MTH.jpg

 

 

 

NVR:

NVR.jpg

 

 

 

PHM:

PHM.jpg

 

 

 

RYL:

PHM.jpg

 

 

 

SPF:

SPF.jpg

 

 

 

TOL:

TOL.jpg

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Pulte Homes is my favorite bellwether in the US Builder sector

 

It peaked in March at $24.47, and at yesterday's close of $15.38, was already 37.1% off the high.

This shows how volatile these stocks can be.

 

PHM - daily chart

qik.gif

 

PHM - weekly chart

eyv.gif

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Here's what I heard in a recent podcast:

 

Many institutional investors got the idea that it might be a smart idea to buy foreclosed homes from banks.

 

+ They quickly acquired large portfolios of empty homes, mostly in the suburbs

 

+ They did some basic refurbishment, and then tried to rent them out

 

+ They found that few people could afford the rents they were asking

 

+ Many of the homes are still sitting empty, because in the ruined economy, people's incomes are too low to absorb the homes at the desired rents

 

The sad news was that this institutional investment meant that too few cheap homes were bought by individuals - The homes were empty, held by banks, and now they are empty, held by institutions. Few can afford them now. And many of those who could afford them, bought new homes instead - being less willing to take the "risk" of buying a foreclosed home unless they were really cheap.

 

With rates jumping, the interest in buying new homes has waned.

 

Before a "final" low is made, all those empty homes, many now held by investors along with those still held by banks, may need to find long term tenants or owner/occupiers. A drop in rents may be coming... especially in the suburbs, where people are less willing to live, now that they have woken up to the dangers of high gasoline prices, and they are watching the quality of suburban roads deteriorate as government finances get more strained.

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Backing up my point about the suburbs...

 

Suburbia is over:

===

 

This could be Excellent news!

It was inevitable.

But I don't think Suburbia will just disappear. It will become a slum, where the poor can be left and forgotten, since there will be little money to help them, or police them in the large areas of suburbia.

 

JHK may be right: The future is in small towns in Agricultural areas

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Mortgage rates have spiked from 3.35% in May to 4.58% now.

 

On a typical $200k mortgage that would mean an increase in payments of $205/month.

 

Now we are seeing the results of a market that is so leveraged up and sensitive to interest rates - a small change in the rate (4.58% is still very low historically) has a very large impact on repayments. I imagine that a move to 5% would see a new leg down in house prices, and a move to 6% would pretty much be cataclysmic.

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Mortgage rates have spiked from 3.35% in May to 4.58% now.

On a typical $200k mortgage that would mean an increase in payments of $205/month.

 

Now making that home unaffordable for many (who have limited Monthly incomes.)

 

Another point is that recent buying was increased by those who bought sooner rather than later, because they wanted to Beat the inevitable rise in rates.

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HOUSING TURNING POINTS are pretty clear on this chart

 

HGX / The PHLX Housing Index ... update

 

htju.gif

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  • 3 weeks later...

Probably.

Here's HGX ... update

 

fe43.gif

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  • 2 weeks later...

Staying short,

 

The bounce is fading now.

 

Friday action:

 

DJUSHB

Percent Change:

-2.43%

418.48

 

Very negative, given the bounce in the market overall.

 

Should have a further lurch down today based on pre-market data.

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Starts are lower...


... but confidence is higher...


while rates are higher


===



= More Vulnerable

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This one looks highly vulnerable

 

PHM / Pulte Homes could get cut in half ... update

 

Now $15.86

 

g1q.gif

 

If support at $14.50 or so is broke, we could see a quick drop to $8

 

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  • 2 weeks later...
  • 2 months later...
  • 1 month later...

Just bumping this thread.

Homebuilders have rallied as part of the wider market rally.

 

Avg 30yr mortgage rate is back to 4.5% I see...

 

Haven't gone near the homebuilders for several months now, since the stage 3 to stage 4 breakdown scenario didn't play out.

They are plainly not fruitful shorting material at the moment - throwing in the towel and accepting that in Q4 last year has saved me a lot of time, effort, and capital.

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Submitted by Tyler Durden on 02/20/2014

 

Even as the primary housing market was slowly circling the drain, the one silver lining was that the US rental market, largely dominated by several Wall Street investment firms, most notably Blackstone, was doing relatively well. It was doing so well that equity sponsors such as Blue Mountain couldn't wait to offload their prized REIT property to the public, culminating with last August's IPO of American Homes 4 Rent, the second-largest US homes-for-rent operator after Blackstone. And since the stock price of all these corporations was performing admirably or at all time highs, supported by the record fungible liquidity sloshing among the world's interconnected markets, nobody was very concerned.

It is time to get concerned...

. . .

Rents collected on the collateral for the first U.S. rental-home securities declined by 7.6 percent from October to January, according to Morningstar Inc.

 

Payments declined as expiring leases and early tenant departures left residences backing the bonds of Blackstone (BX) Group LP’s Invitation Homes vacant, Becky Cao and Brian Alan, analysts at Morningstar’s credit-ratings unit, said in a report. While 8.3 percent of the properties were vacant or occupied by delinquent renters in January, renewals on 78.5 percent of leases that expired the prior month exceeded the analysts’ expected rate of 66.7 percent.

 

The deal’s performance is being watched as Wall Street bankers and institutional property investors seek to follow Blackstone’s $479.1 million transaction in November with additional offerings. Initial lease expirations for the 3,207 homes are scheduled to peak from January through March, Morningstar said. To woo investors and rating firms in the new market, the transaction started with all of the units leased, unlike bonds backed by apartment-building loans.

==

> http://www.zerohedge.com/news/2014-02-20/rental-bubble-also-bursting

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(duplicate post from DrB's Diary):

 

New Homes sales - "the best in 5 1/2 years"

 

"... possibly easing fears of a sharp slowdown in the US housing market."

 

Sales jumped 9.6 percent, to a seasonally adjusted 468,000 units, highest since July 2008.

 

And Dec. sales were revised up from 414,000 to 427,000

 

 

PHM / Pulte Group ... update // TOL

 

PHM.gif

 

I think this rally may be reversed VERY SOON.

Maybe it is bad data.

If housing is so strong, why JPM cutting jobs in their mortgage origination unit ?

 

JPMorgan to cut 8000 jobs, lowers 2014 profit target
Reuters-25 Feb 2014
(Reuters) - JPMorgan Chase & Co (JPM.N), the largest U.S. bank, announced thousands of job cuts on Tuesday as the mortgage lending ...
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(duplicate post from DrB's Diary):

 

New Homes sales - "the best in 5 1/2 years"

 

"... possibly easing fears of a sharp slowdown in the US housing market."

 

Sales jumped 9.6 percent, to a seasonally adjusted 468,000 units, highest since July 2008.

 

And Dec. sales were revised up from 414,000 to 427,000

 

 

PHM / Pulte Group ... update // TOL

 

PHM.gif

 

I think this rally may be reversed VERY SOON.

Maybe it is bad data.

If housing is so strong, why JPM cutting jobs in their mortgage origination unit ?

 

JPMorgan to cut 8000 jobs, lowers 2014 profit target
Reuters-25 Feb 2014
(Reuters) - JPMorgan Chase & Co (JPM.N), the largest U.S. bank, announced thousands of job cuts on Tuesday as the mortgage lending ...

 

 

We may not like it, but that TOL chart is a clearance of long term overhead and should be a BUY.

Think I'll just stay on the sidelines.

 

The builders have been a great buy for the last 2 years. They will be an equally great short at some point, but that time is not now.

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May 2012 Build Costs - Apartments

2012-Apartment-4-7-Stories.jpg

==
>source:

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  • 3 weeks later...

Why millennials love apartments

By Mike Tarson @CNNMoney

VIDEO

 

Apartments are the hottest thing in housing, but the rest of the market could also get a boost when this trend fades.

==

> http://money.cnn.com/video/news/2014/03/13/n-millennials-housing-effect.cnnmoney/index.html?iid=MKT_Taboola

 

At they end, they suggest Millennials will eventually go back to Suburban living.

 

Now they won't !

I think they have learned hate enslavement to automobiles, at long last !

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  • 1 month later...

HOUSING : A Planned takedown ??

 

That's what "john galt" claims at the beginning of this video:

 

John Galt -- "War and Peace" Can Russia Break the Dollar? ~ The Plane Truth ~ PTS3100

 

=

=

 

Let's look at the chart for Pulte Homes

 

PHM ... update : 4-yrs-W

 

AA_zps5fe23600.gif

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