HOUSING QUAGMIRE

There are three data points on housing today:

 

(1)    CNBC is flashing breaking news - “Geithner: It will take a long time to heal damage from the housing crisis”

(2)    KB Homes reports earnings numbers that do not support a housing recovery. 

(3)    Existing home sales are at the lowest level in eight months.

 

If the housing recovery story is not working with significant government support in place, when is it going to work?

 

A picture of the housing "recovery" (or lack thereof) is shown in the two graphs below - supply and demand.  We have also included a six-month moving average to remove some volatility of late to see the trends more clearly.  Regardless of volatility, existing home sales have stagnated and the supply of new homes is starting to grow again.   

 

Today, the NAR reported that sales of existing U.S. homes fell 0.6% in February, declining for a third month.  The 5.02 million annual rate reflects the lowest level in eight months and is significantly below the 6.5 million annual rate seen in 2H09. 

 

Importantly, the number of previously-owned homes on the market jumped 9.5% to 3.59 million.  At the current annual run rate, the month’s supply moved to 8.6 months from 7.8 months last month.

 

We have been cautious on the housing recovery story and today’s news provides no evidence to change our stance.  The Consumer Discretionary (XLY) is up 8.4% over the past month (the best performing sector in the market) and the housing names have significantly underperformed.

 

There is basically one month left for consumers to qualify for the current government housing support program.  Given the lack of consumer acceptance for the current program (weather related issues or not), it is hard to see a light at the end of the tunnel for housing.

 

Howard Penney

Managing Director

 

HOUSING QUAGMIRE - HP11

 

HOUSING QUAGMIRE - HP22

 


Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more