Homebuilder's Sentiment Index drop

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genod

genod

Member
About 2 weeks ago I posted my concerns about the housing industry. I am still trying to understand what could happen to the economy as more bad news/data about the housing bubble bursting comes in. I am not into real estate investing. I own a home to live in, not to make money off of. I curious in terms of how the slumping housing sector will affect the economy.

A few days ago the NHBA index dropped more than forecast. Someone did a correlation of the NHBA index vs. S&P 500 (lagging the S&P 500 by about a year). The correlation was uncanny. Here is the graph courtesy of minyanville dot com.


Would appreciate some thoughts from the board members on this.

saut8281.png
 
Wow, that is a good graph. I also concur with it. The only thing that bothers me is that it is a graph of correlation between S&P and NHBA but it doesn't really address bubble and burst on each states and territories. Some states are getting hit pretty hard and some are doing well just like Hawaii and Guam.

This is why I always advocate to people that wants to get into real estate to know their market within their area. For Guam, they plan on spending billions for relocating the Marines from Japan and they have it phased within 6-10 years. There is also a decision that will be made on April 07 on where the new aircraft carrier and its supporting ships will be stationed. Choice is either Hawaii or Guam.

The house right next to me was bought on a foreclosure fpr 119k 5 months ago (i'm still kicking my butt for this) and now its in the market for 220k. GRRRR!!!!

Pyriel
 
It doesn't look pretty on paper; no sir. Has Birch seen this one? Wonder what his take will be? :confused:
genod said:
About 2 weeks ago I posted my concerns about the housing industry. I am still trying to understand what could happen to the economy as more bad news/data about the housing bubble bursting comes in. I am not into real estate investing. I own a home to live in, not to make money off of. I curious in terms of how the slumping housing sector will affect the economy.

A few days ago the NHBA index dropped more than forecast. Someone did a correlation of the NHBA index vs. S&P 500 (lagging the S&P 500 by about a year). The correlation was uncanny. Here is the graph courtesy of minyanville dot com.


Would appreciate some thoughts from the board members on this.
Click to expand...
 
The housing index on the chart, as shown, is heading sharply down. I don't think it has bottomed; next month's number will be even worse. It won't start turning back up until the Fed starts dropping rates, so the index will decline the rest of this year. What does that say? S&P 500 at 400-500 or so a year from now?

What possible confluence of events could bring that about???
 
Pilgrim said:
The housing index on the chart, as shown, is heading sharply down. I don't think it has bottomed; next month's number will be even worse. It won't start turning back up until the Fed starts dropping rates, so the index will decline the rest of this year. What does that say? S&P 500 at 400-500 or so a year from now?

What possible confluence of events could bring that about???
Click to expand...
Hey! Don't say that too loud, Birchtree will have a heart attack!:(
 
nnuut said:
Hey! Don't say that too loud, Birchtree will have a heart attack!:(
Click to expand...

I'm not going to worry about Birch. He may like to posture and pose as a perma-bull, but he is ultimately a realist and clearly understands the mechanics of selling short. If the market begins to collapse, he will make money from it.
 
Pilgrim said:
The housing index on the chart, as shown, is heading sharply down. I don't think it has bottomed; next month's number will be even worse. It won't start turning back up until the Fed starts dropping rates, so the index will decline the rest of this year. What does that say? S&P 500 at 400-500 or so a year from now?

What possible confluence of events could bring that about???
Click to expand...

When I think about how sharply the NHBA index has dropped, my first thought is about that housing construction starts have also dropped. What are all of these construction workers going to be doing if they are no longer building houses. I think of the related job sectors like electricians, plumbers, etc... What about stores like Lowes, Home Depot, etc.

Now I need to back away from the keyboard... how deep would a possible housing bubble burst ripple through the economy? I'm not buying this chart...but it makes one ponder.:confused:
 
genod said:
Now I need to back away from the keyboard... how deep would a possible housing bubble burst ripple through the economy? I'm not buying this chart...but it makes one ponder.:confused:
Click to expand...

I agree, interesting stuff but my gut says it's too pat. If a single correlation had that much predictive power, every talking head in the media would have been all over over it as it developed. I hope and expect we'll get the November/December rally and after that, who knows.
 
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