Why The Real Estate Market Is Topping Out

My primary concern is the lack of growth in jobs and wages. People still do not feel confident that their jobs will remain for the long term. The consumer confidence reading came in at 79.7 in September, which is still well below the 90.0 that is associated with a healthy economy. Unless people feel good about their job security, they will hold off on buying anything that could tie them down in a debt or cut away from their rainy-day savings.

In addition, a good portion of the increase in home prices has been due to the scooping-up of real estate by institutions and funds, and less by the average home shopper. This trend has created a false sense of confidence in the housing market; once the money flowing in begins to dry up, we will begin to see some fragility in the housing market.

I still think it’s a decent time to buy a home, especially in the depressed areas of the country. As for home builder stocks (NYSEARCA:XHB), I would be much more hesitant, as I believe the downside risk more than overrides the upside potential at this time.

This article is brought to you courtesy of George Leong from Investment Contrarians.

Pages: 1 2

Leave a Reply

Your email address will not be published. Required fields are marked *