Need a BK or two before this sector settles out, IMHO.
You should never try to bottom fish, better to let the trend develop and then jump on. The risk trying to pick bottoms far outweigh the few percentage points you will lose by getting on the train AFTER it has left the station.
With that said, if I felt the need to look at this sector, I would look at XHB. It is an ETF basket of HBs. Trying to pick individual HBs is like Russian Roulette right now. Who knows which ones might implode? Better to play the sector for the rebound you may feel is coming. Personally I don't think we see a comeback until 2 HBs go belly up, median home prices retrace 20%, and the regulatory bodies step up and start enforcing the rules on the lenders.
Anecdotally, my brother is in construction in the Philly area. His job involves the final tie in between a newly constructed home and some public utilities, which is not completed until a week before settlement. He spent 6 months laid off last year and every friday when he gets his pay he dreads the office trip as it may mean a lay-off. He says they are barely getting enough work for the crews they have on and a 5% drop in work means layoffs, 10% or more and half the crews hit the queue. This tells me we haven't turned around yet.
You should never try to bottom fish, better to let the trend develop and then jump on. The risk trying to pick bottoms far outweigh the few percentage points you will lose by getting on the train AFTER it has left the station.
With that said, if I felt the need to look at this sector, I would look at XHB. It is an ETF basket of HBs. Trying to pick individual HBs is like Russian Roulette right now. Who knows which ones might implode? Better to play the sector for the rebound you may feel is coming. Personally I don't think we see a comeback until 2 HBs go belly up, median home prices retrace 20%, and the regulatory bodies step up and start enforcing the rules on the lenders.
Anecdotally, my brother is in construction in the Philly area. His job involves the final tie in between a newly constructed home and some public utilities, which is not completed until a week before settlement. He spent 6 months laid off last year and every friday when he gets his pay he dreads the office trip as it may mean a lay-off. He says they are barely getting enough work for the crews they have on and a 5% drop in work means layoffs, 10% or more and half the crews hit the queue. This tells me we haven't turned around yet.
Desrat the XHB idea is appealing to me. By the way the PHM conference call was a miserable one, yet the stock goes up by $1.50 as I write. Maybe this sector really is washed out. I appreciate your comments guys. Any more insight is appreciated. Again desrat, thanks for pointing out the XHB idea.
The bottomline is that it all boils down to credit. right now I'm still only qualifying 30% of my clients to take advantage of some of the dips. Even though the fed continues to drop rates it doesn't always reflect in the mortgage sector. Remember the banks are still trying to make their losses back from all the bad notes their sitting on (e.g. foreclosures and short sales) They're still gonna inflate their margins so they make some money on the new loans. Hence the rates still aren't all that great.
However! i will say I did price some of my clients down to a 4.99% 30yr. haven't done that since summer 2005.
However! i will say I did price some of my clients down to a 4.99% 30yr. haven't done that since summer 2005.
to further my thoughts...once i see that more of my banks are being more leanient in their underwriting then I can say it'll help out the homebuilders who have all that excess inventory out there. (e.g. qualifying more borrowers.)
Right now its only a handful of my contact list vs blindly picking banks who'd pay me the best rebate. therefore I only revolve my clients around 3-4 banks that continuously fund without too much redtape. 2 years ago I had about 15 of them.
Right now its only a handful of my contact list vs blindly picking banks who'd pay me the best rebate. therefore I only revolve my clients around 3-4 banks that continuously fund without too much redtape. 2 years ago I had about 15 of them.
Purdue, I hope you have taken your time before jumping into this pool. IMHO the outlook has gotten worse in the 3 weeks since I last posted. The brother I spoke of earlier has been laid-off along with 60% of the work force in his field. He has seen the writing on the wall and decided to get re-certified for work on infrastructure repair as opposed to waiting for the "piece of cake" job he keeps losing to stabilize.
Also from a technical stand point the shit is starting to hit the fan. The 10 year note has DECISIVELY broken out of a flag pattern that has been trading for a month, with a yield target of 4.2% on my charts. If we hit this level the cost of borrowing is going to go through the roof. Even as we approach these higher levels the "price" of mortgages is going to keep rising. This credit tightening is VERY bad news for all homebuilders.
Also from a technical stand point the shit is starting to hit the fan. The 10 year note has DECISIVELY broken out of a flag pattern that has been trading for a month, with a yield target of 4.2% on my charts. If we hit this level the cost of borrowing is going to go through the roof. Even as we approach these higher levels the "price" of mortgages is going to keep rising. This credit tightening is VERY bad news for all homebuilders.
In today's news:
New construction of single-family homes fell to a 17-year low in January, according to a government report on the battered housing market Wednesday.
Starts of single-family homes fell to an annual rate of 743,000 in the 10th straight monthly decline.
The level of single-family home building is down 5 percent from December, 34% from a year earlier and 60% from the record high reached only two years ago.
IMO, the downward momentum is starting, watch from the side for awhile.
:smoker2:
New construction of single-family homes fell to a 17-year low in January, according to a government report on the battered housing market Wednesday.
Starts of single-family homes fell to an annual rate of 743,000 in the 10th straight monthly decline.
The level of single-family home building is down 5 percent from December, 34% from a year earlier and 60% from the record high reached only two years ago.
IMO, the downward momentum is starting, watch from the side for awhile.
:smoker2:
