David Zeiler: The long-anticipated housing market rebound will hit a speed bump this year as the number of foreclosures rises again. With January’s mammoth $26 billion settlement between five major banks and a group of state attorneys general, foreclosures that had been held up for a year or more are Read more…
“The ability to short is essential to an efficient market, otherwise there’s nothing to stop zealots from pricing things abnormally high.”
One version of the ETF (UMM) allows investors to buy the index.
“It’s like buying a house, except you don’t have to go through the real estate agent, take possession of a property, maintain it, rent it out,” Shiller says.
The other offering (DMM) provides an opportunity to short the index.
“Markets like this will also create an infrastructure for products,” Shiller says. “For example, insurers could issue home-equity insurance and then hedge themselves by taking a position in this market.”
New home starts? I think we still have quite a bit of inventory to work through before home builders see any real recovery. Unfortunately foreclosures are still rising, and auctions are being held with properties being sold off to the tune of hundreds at a time. Looking through local foreclosures many of the homes on the auction block are less than 10 years old. Who needs to build right now? Perhaps there are pockets of the country that are experiencing a population shift are the key? Dallas Texas added more than 162,000 residents between 2006-2007, Atlanta 151,000, Phoenix 132,000. Seems like all warm weather areas…? These are only a few of the areas of the country people are retreating to for lower housing prices and costs of living. Perhaps their influx of people will help the new home starts as other areas will be left working through the foreclosure backlog. As always, we appreciate your input.
A Bottom for Real Estate? – HOV, URE, XHB, KBH
March 27, 2009
By: Billy Fisher
Contributor, Stock Traders Daily
Following what has seemed like an unending downturn for the sector, real estate received some rays of light this week.
As of the market’s close on Thursday, major homebuilder names such as KB Home (NYSE: KBH) and DR Horton (NYSE: DHI) had already locked in gains of 25.9% and 30.6% this week alone. Hovnanian Enterprises (NYSE: HOV) had soared 64.4% since last Friday’s close and experienced double its average daily trading volume on Wednesday.
So what initiated this week’s rally? On Wednesday the Commerce Department reported that sales of new homes in February rose for the first time in 7 months. This metric increased 4.7% to an annual rate of 337,000. Then Thursday brought an additional encouraging development for the sector when a Deutsche Bank analyst said that the stocks of homebuilder companies may be reaching a bottom.
If this development proves to be the case, it would be a welcomed sequence of events for a sector that has been in a downward spiral since peaking in the summer months of 2005. The past two years have been especially trying for those stakeholders associated with the homebuilding industry. In 2007, the SPDR S&P Homebuilders ETF (NYSE: XHB) and the iShares Dow Jones U.S. Home Construction Fund (NYSE: ITB) racked up respective declines of 47.7% and 58.0%. Last year did not turn out to be all that much better. These two funds experienced declines of another 36.2% and 41.8%.
Looking forward, it is inevitable that investors in this arena will be wondering whether or not this week’s rally is sustainable. Fortunately, the inventory of new homes hitting the market is much leaner than it has been during past years of this extended market downturn for homebuilders– it is at its lowest point in nearly 7 years. Prices of newly constructed homes have been coming down for several quarters now and mortgage rates are at record lows. A tax credit that arose out of the government’s stimulus plan for buyers who purchase a home prior to December 1st also should play a contributing role in stirring up new sales in the months ahead.
Homebuilders aren’t the only stocks looking to shift into a recovery mode. Even REITs participated in the broader real estate rally on Thursday. The Ultra Real Estate ProShares Fund (NYSE: URE) experienced a 5.5% move up the charts yesterday before closing at $2.69. “We invested in URE at $2.14,” said Tom Kee Jr., president and CEO of Stock Traders Daily. “We intend on holding onto it with risk controls in place.”
The volatility that REITs have been subjected to in recent months will likely continue to keep Kee on his toes. He will also be monitoring homebuilder stocks for trading opportunities via trading plans he has developed specifically for KBH, DHI and HOV.
Solar panels on every house across the GLOBE? I certainly would like to reduce my utility bills. What would the landscape look like with solar panels on every rooftop? The country would be a cleaner and better place using the sun’s energy to put back into the world!
The investment “KWT” seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Ardour Solar Energy index. The fund normally invests at least 80% of total assets in equity securities, which may include depositary receipts, of U.S. and foreign companies primarily engaged in the production of solar power. It is non diversified.
Government Comments Send Chinese Solar Stocks Soaring
Chinese solar stocks soared on Thursday after the Chinese government stated support for solar initiatives
According to a report in Digitimes, the Chinese government has shown a strong interest in the development and support of solar energy. No details were offered regarding a time schedule or plans for government subsidies. Still, the news has sent Chinese solar stocks higher.
As a whole, tickerspy’s Chinese Solar Stocks Index is up by 27.1%. Among the leaders are Suntech Power Holdings (NYSE: STP – News) and Yingli Green Energy (NYSE: YGE – News), with gains of 38% and 35% respectively. Even the laggards in the Index today, JA Solar (Nasdaq: JASO – News) and Canadian Solar (Nasdaq: CSIQ – News) are posting gains north of 17%.
Solarfun Power Holdings (Nasdaq: SOLF – News) is up 20% despite analyst comments on liquidity concerns. Citing a difficult operating environment, Jeffries notes that the company faces cash issues relating to an acquisitions payment and ongoing CapEx demands.
Meanwhile, a number of Chinese solar stocks, including China Sunergy (CSUN) and LDK Solar (NYSE: LDK – News), have faced the pressure of declining inventory value as a result of the global economic downturn. However, this news too has been shrugged off amid the rebound, as LDK is surging ahead with gains of over 33%. China Sunergy is also a top performer with a gain of 29%.
As of this writing, the Chinese Solar Index is up about 57% over the last month, easily outpacing the performance of tickerspy’s other Chinese stock Indexes.
Investors can follow the Chinese Solar Stocks Index and view related performance charts and metrics at tickerspy.com
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Just think how nice it would be for the government to allow illegal immigrants to purchase homes in the US. This would solve the housing crisis right? I think this decision would create disastrous debates! Bet on the housing market long or short with ETF’s “SRS” & “URE”. Whether or not you think immigration reform is the key to soaking up the surplus in the housing market, makes you wonder if the housing market has bottomed. Existing housing sales are up, new home starts are increasing, and foreclosures are slowing . There are good red blooded americans that have been on the sidelines waiting to see an indication that the time has come to get out and buy. With a nudge by the government to give rebates for first time home buyers, it is only a matter of time for the market to mend. But hey, throw the immigrants in and game on.
If you believe Dr. Doom like I do, we could be looking at DOW 5000 and S&P 500 before year’s end. While some of you think the bottom is in, you could be in for a rude awakening. This past weeks rally has been nothing but a classic bear market rally. The bears are just gearing up for the last raid before the bottom is here. Make money on the next leg down with ETF-DOG. The investment seeks daily investment results, before fees and expenses, which correspond to the inverse of the daily performance of the Dow Jones Industrial Average index. The fund normally invests 80% of assets in financial instruments with economic characteristics that should be inverse to those of the index. It may employ leveraged investment techniques in seeking its investment objective. The fund is non-diversified.
US Recession Could Last Up to 36 Months: Roubini
The man who predicted the current financial crisis said the US recession could drag on for years without drastic action.
Among his solutions: fix the housing market by breaking “every mortgage contract.”
“We are in the 15th month of a recession,” said Nouriel Roubini, a professor at New York University’s Stern School of Business, told CNBC in a live interview. “Growth is going to be close to zero and unemployment rate well above 10 percent into next year.”
Echoing a speech he made earlier in the day, Roubini said he sees “no hope for the recession ending in 2009 and will more than likely last into 2010.”
Roubini, who is also known as “Dr. Doom,” told CNBC that the risk of a total meltdown has been reversed for now but that the economy is going through “a death by a thousand cuts.” He also said that “most of the U.S. financial institutions are entirely insolvent.”
“The market friendly view for the banks is nationalization,” said Roubini. “Temporarily take over the banks, clean them up and get them working again.”
As for the claim that the Treasury Department can’t legally take over the banks, Roubini said that most of the banks are already owned by the government and that the government could “put them in receivership” if it had to.
Earlier in the day, Roubini spoke to the CBOE Risk Management Conference and said he believes total losses could peak at $3.6 trillion in the financial system, with half of that being borne by banks and bank dealers and the other half borne by hedge funds and pension funds, among others.
He said that while U.S. GDP next year could be zero, global GDP could dip into negative territory.
“We could end up … with a 36-month recession, that could be “L-shaped stagnation, or near depression,” Roubini said. He puts the chance of a severe U-shaped recession at 66.7 percent, and a more severe L-shaped recession at 33.3 percent.
Roubini listed a litany of negative omens: Capex spending down 20-30 percent for investment grade companies, self-perpetuating deflation, all making a bad situation worse.
“If you expect prices to be lower tomorrow, why would you buy today?”, asked Roubini. He says it’s easier to break out of am inflationary cycle than a deflationary one, and while a year of deflation “is okay,” longer would be “a disaster.”
So what can the government do? The easy part is lowering interest rates and buying toxic assets. The hard part, he says, will be tackling housing. Roubini says that the housing market, like a company restructuring in bankruptcy, needs to have “face value reduction of the debt.” Rather than go through mortgages one by one, he says reduction has to be “across the board…break every mortgage contract.”
Roubini also took issue with the $800 billion stimulus package, saying it’s not enough. For one thing, there’s only $200 billion upfront, and half of that is a tax cut, which Roubini calls “a waste of money” that is not going to make a difference.
Finally, while he says there will be “a light at the end of the tunnel”, it’ll probably get worse before it gets better. Those who believe in a second half recovery this year “are delusional” he says.
In fact, based on Roubini’s calculations, we could conceivably see the S&P 500 at 500, the Dow at 5000.
SOURCE: Jane Wells CNBC Reporter www.cnbc.com