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Take a final look at the XHB today, Ouch

Everyone token favorite builder stock is now back to early 2013 levels with the last earnings report showing some profit margin hit on sales prices

Ironman says

You're going to make Strategist cry.

In theory no, because all that means is that you can buy more shares for the 200% run we are supposed to have in the next few years

I understood why people followed Downtown Josh Brown ( CNBC) XHB was new homes was going to go ( Ballistic) trade and Keith McCullough Alpha trade of the year was the Builders

It made sense on paper, very low comps to beat, sales were going to grow regardless of the year.. But...

Difference between pricing for a low bar context and then the Housing is going to go ( Ballistic)

I tried to warn them early in the year don't over hype the housing story. Now no one talks about it anymore

As always in this cycle, it's about context, too much over hyping on the housing demand curve, slow and steady is the real call here, Not Nirvana or Ballistic

The jobs will be there to create a 200% run up?

indigenous says

The jobs will be there to create a 200% run up?

The best case for builders which has been made since 2011 is that sales are historically low.

This is true, we are one day from 2016 and sales even today are what we would see in a recession. Still in question if we even break over 500K on this data point in 2015.

When I went to the UCLA Anderson Conference in 2013, people were talking about 850K by this point of the cycle, 1.5 million in Starts very soon.

I realized then that if all the housing experts, economist and analyst were this bullish they were telling their people this as well, that housing was in #Nirvana in 2013.

My point for the past 5 years, "Not This Cycle" we don't have the buyers in this cycle, wait until years 2020-2024 to get bullish on ownership demand we are in a massive renting cycle for all the right reasons.

Lack of discipline and running old economic models in a new world economy.

Still this chart explains why the builders are having trouble meeting all their expectations years, 5, 6 and 7

I get that, but without the jobs being created there will be no run up in the next cycle either.

indigenous says

I get that, but without the jobs being created there will be no run up in the next cycle either

I am not worried about the Jobs factor in terms of numbers, we have over 153 million working Americans , demographics are going to be a very big positive for the U.S. and the U.K. in the next decade.

My biggest concern is that new homes price out most of their buyers and become a luxury item rather than a cost of shelter

The market will Logan Mohtashami says

I am not worried about the Jobs factor in terms of numbers

What about in terms of quality, i.e. what does the inflation adjusted mean salary look like.

Calif has grown to 40 million people but the income has not grown with it.

Logan Mohtashami says

My biggest concern is that new homes price out most of their buyers and become a luxury item rather than a cost of shelter

The market will go were the profit is, IOW that will not be a concern. Albeit pockets will not because there is money coming in from IPOs in the Bay area or La because of the movie industry and the growth in entertainment. Or maybe the growth will be in Utah or Colorado.

indigenous says

What about in terms of quality

That has been my core thesis always, Debt to Income ratio, more in this cycle
We still are going to have 5.7 - 5.8 homes sold with a 75% mortgage profile for existing homes and 90% for new homes, there are millions of Americans who make good enough money to own a home today

The best way to fight housing inflation is dual income capacity, this is why I am bullish years 2020-2024

The rest are renters, that's the different, renters rent because they can't afford to buy and that should always be the case, why I fight to make sure they don't ease standards all the time

Logan Mohtashami says

The best way to fight housing inflation is dual income capacity, this is why I am bullish years 2020-2024

The best way is to quit QE and ZIRP

indigenous says

The best way is to quit QE and ZIRP

#QE ended a year ago, and #ZIRP ... #RIP until next time you rise from the grave :-)

You expect to see an aircraft carrier turn on a dime? Are the MBSs marked to market? Has the mortgage rate really gone up?

indigenous says

Has the mortgage rate really gone up?

10's have stayed in their short term channel, I don't expect a 1994 spike this year because of demographic deflationary pressures around the world

The market edged out a 0.73% loss for the year

Ironman says

Logan Mohtashami says

Take a final look at the XHB today, Ouch

You're going to make Strategist cry...

I'm already crying. "ITB" went up 6% when I was expecting 20%+
I'm gonna blame you and Logan for scaring the hell out of everyone.

Strategist says

I'm gonna blame you and Logan for scaring the hell out of everyone.

Keep an eye out on the earnings call, one thing that I did get wrong in 2016, I didn't think we would see profit margins hits on the builders earnings report calls in 2016 and the end of the year we saw TOL and Lennar come out with the first small breath of that.. as long as that doesn't get worse, the index should be fine, Q1 & Q2 reports big now

Logan Mohtashami says

Strategist says

I'm gonna blame you and Logan for scaring the hell out of everyone.

Keep an eye out on the earnings call, one thing that I did get wrong in 2016, I didn't think we would see profit margins hits on the builders earnings report calls in 2016 and the end of the year we saw TOL and Lennar come out with the first small breath of that.. as long as that doesn't get worse, the index should be fine, Q1 & Q2 reports big now

This Spring I am predicting the start of a new phase in real estate activity led by sharply jumping home prices. When prices and sales take off, no one will care about the earnings. They will blindly buy the home builders.

Strategist says

This Spring I am predicting the start of a new phase in real estate activity led by sharply jumping home prices. When prices and sales take off, no one will care about the earnings. They will blindly buy the home builders.

Dude, it's 5:40 you can't be be drinking already! Pace yourself old man you're not 20 anymore ;-)

Happy New Year Buddy!

Logan Mohtashami says

Strategist says

This Spring I am predicting the start of a new phase in real estate activity led by sharply jumping home prices. When prices and sales take off, no one will care about the earnings. They will blindly buy the home builders.

Dude, it's 5:40 you can't be be drinking already! Pace yourself old man you're not 20 anymore ;-)

Happy New Year Buddy!

I'm not out partying this year. All those drunks on the road might scratch my precious electric car. :)
Happy New Year :)

Strategist says

Happy New Year :)

Happy New Year and we are going to have another year where Harry Dent will be wrong with Dow 6,000

Logan Mohtashami says

Happy New Year and we are going to have another year where Harry Dent will be wrong with Dow 6,000

Will Strategist be right?

Strategist says

Will Strategist be right?

Only if he continues to imbibe.

Strategist says

Will Strategist be right?

Which ETF & % ... anything that has Lowes or Home Depot in it has been a plus or pure home builders? The only reason I went on CNBC to talk about TOL & XHB is because the growth they're saying on air for 6 months was just simply not true, you needed to see the Builders up 44% on total sales to get that type of growth, it started at 24% and then went lower when rates moved from 3.625%- 4.125% so they missed the revision story like most people do on the up and down side with new homes

If I told people back in 2013 ( When Housing Was Supposed To Be In Nirvana) that New Home Sales would be struggling to break through 500K in 2015 with 3.625%-4.125% everyone would have laughed at me and said I was out of my depth ....

Sales are so low that the downside is limited but the market place has been telling everyone a story for years, very few listened.

It's all about how much lower priced homes they can sell next to existing inventory which is much cheaper, that until demographics get better for housing

Logan Mohtashami says

Strategist says

Will Strategist be right?

Which ETF & % ... anything that has Lowes or Home Depot in it has been a plus or pure home builders?

ITB - up 30%+
AAPL - $130.00
S&P 10%+
OC Median home prices - 15%+

Strategist says

ITB - up 30%+

This is a good point ITB was $26 dollars In Early 2013 and it be open at $27.11 into 2016 :-)
but I think it was $9 bucks at the bottom

Logan Mohtashami says

Strategist says

ITB - up 30%+

This is a good point ITB was $26 dollars In Early 2013 and it be open at $27.11 into 2016 :-)

but I think it was $9 bucks at the bottom

What about the OC median?

Strategist says

What about the OC median?

Much higher than 15% from the bottom in 2011/2012

Let's take my home, 2006 it appraised for $695,000 it went to as low as $395,000 and now is $625,000
My rental home peak 2006 was $320,000 got as low as $170,000K and Now last model sold $270K

Logan Mohtashami says

Strategist says

What about the OC median?

Much higher than 15% from the bottom in 2011/2012

What? It's already there. I'm expecting a 15% increase in the OC median from today to Dec 31, 2016.

Strategist says

I'm expecting a 15% increase in the OC median from today to Dec 31, 2016.

Are you still drinking?

indigenous says

Strategist says

I'm expecting a 15% increase in the OC median from today to Dec 31, 2016.

Are you still drinking?

I just poured some wine into a small glass to enjoy with my dinner.

Strategist says

I'm expecting a 15% increase in the OC median from today to Dec 31, 2016.

Year over Year? Peak Price gains YoY was in 2013, I don't see that happening next year 15% year over year with inventory rising

Strategist says

small glass

I am hearing from a few of my friends that rentals-atleast in the east bay-are slowing down and even slightly dropping? Is this true?

lostand confused says

I am hearing from a few of my friends that rentals-atleast in the east bay-are slowing down and even slightly dropping? Is this true?

Yes, there is a bit of a slow down in rents and sales as well. I saw a house fall through from pending that I though would go for sure. Also one of my neighbors that bought a house at the bottom is putting it for sale (never lived in it for 4 years; I think he is Chinese national).

indigenous says

Strategist says

I'm expecting a 15% increase in the OC median from today to Dec 31, 2016.

Are you still drinking?

I just stopped drinking. For some strange reason there was nothing left in the bottle. :(

Happy New Year

I'm in San Diego and I'm seeing a lot of homes come onto the market on Redfin, which seems weird given it's not Spring/Summer.

indigenous says

Happy New Year

Happy New Year

Also,

New Homes 500K in sales
Existing Homes 5.2 million in sales

Though New Homes is more important to the economy

Each sector has it's own value , New Home inventory is well over 5 months now, so their is no reason for the slow down in the rate of sales from the start of the year, unless the demand curve really did get weaker from a 0.50% move up in rates.

Existing homes as been more steady, though growth has been more difficult since the Taper spike in rates in 2013.

5.10 2013 Miss
4.90 2014 Miss
5.20 ( roughly) around there, is on par with some estimates .

Not much velocity in this cycle, a lot low bar starting points

Logan Mohtashami says

New Homes 500K in sales

Existing Homes 5.2 million in sales

Though New Homes is more important to the economy

Each sector has it's own value , New Home inventory is well over 5 months now, so their is no reason for the slow down in the rate of sales from the start of the year, unless the demand curve really did get weaker from a 0.50% move up in rates.

Existing homes as been more steady, though growth has been more difficult since the Taper spike in rates in 2013.

5.10 2013 Miss

4.90 2014 Miss

5.20 ( roughly) around there, is on par with some estimates .

Not much velocity in this cycle, a lot low bar starting points

OK, I get it. Please remember December 2011 was even worse. A lot lot worse. But what happened? A huge wave of desperate buyers who suddenly decided the time was right to buy. This Spring the time will be ripe again, except it will be a Tsunami of desperate buyers.