Housing

Frequently, there’s money to be made in the stock market in the months following the initial curve inversion. After the inversions of August 2006 and June 2019, the S&P 500 rallied another 23% and 19%, respectively, into its final bull market high. If this cycle plays out in textbook fashion, the business-cycle peak would arrive in September.

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Those in their peak earning years (40s and 50s) who’ve also enjoyed the stock market’s windfall gains are very likely to have seen their annual expenses climb much higher than the Consumer Price Index over the last several years.

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On a technical basis, Homebuilding stocks have only just emerged from their decade-long post-bubble bust. With P/B 24% below the mid-2005 peak and 15% below the “overvalued” threshold, they look reasonably priced in a world that’s almost entirely devoid of value.

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A major driver of the division in recent performance among retail groups has been the burgeoning “nesting” theme. Stuck at home, consumers are directing their dollars toward indoor and outdoor home upgrades. A related theme has now established itself in the upper rankings of our group work—Housing.

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The pattern of sharp sell-offs followed by equally sharp rallies continued in June. Most risky assets recouped nearly all the losses suffered in May, and then some.

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Headlines surrounding the U.S. housing market have recently fixated on sputtering home sales; declining affordability, thanks to the combination of rising mortgage rates and sky-high home prices, is to blame.

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Despite record low mortgage rates and pressure to re-loosen down payment and lending requirements, single family housing starts have yet to recover to levels consistent with even the average recession trough.

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Sectors that become the object of obsession during one economic cycle tend to remain cyclically depressed in the following one.

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Today it seems taken for granted that the great housing meltdown of 2006-2010 was sufficient to purge the last decade’s excesses, and that housing can now be relied upon as one of the drivers of a slow but elongated U.S. economic expansion.

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The stock market wealth effect has been direct and pronounced. But it’s been wearing off, with the subsequent rally after each Fed stimulus weaker than the previous one.

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With a number of Housing-related stock groups remaining in the Attractive range, various Home Price Index (HPI) methodologies are dissected to better understand the data included.

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The Homefurnishing Retail group was purchased in the Select Industries Portfolio in late May.

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Are mortgage rates still too high for a rebound when looking at real mortgage rates?

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MTI studies of market values, investor psychology and price action have (so far) overwhelmed the economic “elephants in the room.” A few thoughts on those elephants.

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Housing data is so far following the picture-perfect path of a bubble aftermath. Based on other bubbles, the next cyclical top in housing will likely occur at astonishingly low levels.

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Housing stocks, and the enablers that helped create the bubble (Financials), are following the usual pattern of busted bubbles. After the bust, these past bubbles typically see a beta bounce establishing post crash highs. After that, it can take many years before these highs are again broken.

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We consider it incredible that most of the leading economic indicators have staged such traditional V-shaped rebounds with virtually no boost from the housing sector.

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Lots of people spinning economic and market statistics to cast doubt on the recovery and stock market rally. Doug Ramsey goes point by point to make an honest assessment about the current conditions. Things do actually look pretty good right now!

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If the November lows in the Homebuilders holds, based on the leading relationship between stocks and starts, an upturn in housing starts (not the broader economy) should be imminent.

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Following patterns of past burst bubbles, Homebuilders seem poised to rally.

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