Good news for homebuilders “…the price of lumber is at the highest level since mid-2008…it may carry a bullish message for
a group of stocks that relies heavily on the use of lumber. And that would be homebuilders ….DR Horton,
the country’s second largest homebuilder, report the first quarterly profit since 2007.
Pending home sales also rose 1%….In fact, the DJ Home Construction ETF (ITB )has gained 52%
over the last twelve months versus 33% for the S&P 500.” (From John Murphy Market Message Tue, Feb 2 2010)
At the same time“the proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery.
Nearly 10.7 million households had negative equity in their homes in the third quarter, according to First American CoreLogic, a real-estate information company (from Pumps on full ,,Chris Martenson, No0vember 24, 2009)
I will appreciate for any comments.
Maybe I’m confused but wouldn’t a higher priced raw material make it harder for the home builder to compete against falling home prices? Maybe I’m missing something, can you explain?
I think he’s pointing out the schizophrenic nature of the message. It is a marketing/psychologic tactic:
You give a fact that is verifiably true ie the price of lumber is at an all time high then you insert your sales/propaganda message after the correct fact. It is an old used car salesman tactic.
About 80 percent of naive people will assume the second fact is correct after verifying the first fact.
Hope this helps
(edit) btw I wouldn’t blow the life savings investing in homebuilders right now, but then I am not an “investment professional”.
I agree with you.
It makes sense when home prices rise together with raw material (lumber).
But how you can explain DR Horton report the first quarterly profit since 2007?
It is interesting to compare different information/facts.
I try to catch what happens.