Looks to me like maybe the payback has run its course.
I’d look for a rebound through the orange line I drew.
The only problem is there aren’t a lot of actual houses for sale.
So a pick up in housing starts can’t be far off either as they are very low given 1-3% GDP growth supported mainly by income helped by the govt deficit spending, lower home prices, and reasonable mortgage rates?
And yes, the surviving companies are those that have figured out how to make money in this environment, and most have massive operating leverage should GDP pick up to more normal recovery levels.
Still looks to me like over the next few years the big money will be lost by being out of stocks given where it seems we are in this cycle.
Unless Congress gets serious about near term deficit reduction. So far it’s pretty much all talk, but who knows!
On Wed, Aug 25, 2010 at 10:48 AM, wrote:
The payback from the expiry of the government’s tax program has been horrific. As can be seen from the chart, new home sales are at multi-decade lows. Existing sales yesterday were alarmingly poor. Despite this news, homebuilders are doing better, no doubt helped by Toll Brothers’ earnings today which were significantly better than expected.