Greg Guenthner

The much-heralded housing recovery is over.

No, you won’t see a bunch of new foreclosures in your neighborhood. And I doubt the value of your home will plummet. But the big, first phase of the housing market’s under-the-radar rise is finally cooked.

That means no more easy gains from homebuilding stocks. These names were great buys in 2011 and 2012. But right now, they just aren’t performing.

The simple fact is that expectations have run wild. The rebound in the real estate market isn’t a secret anymore. People all over the country can see the pickup in sales and construction in their respective towns. They’ve bet big on the homebuilding stocks. Now, it’s a crowded trade.

“While they have made great strides in the past year, home-builder stocks have become volatile recently as investors deal with mixed economic housing data, rising mortgage rates, and, in the cases of a few overheated markets such as San Francisco, worries that the market is setting up for another painful collapse,” reports MarketWatch.

Homebuilders

While I think concerns of another collapse are overblown at this juncture, it’s not a stretch to say that homebuilder names could keep falling for some time. In fact, the broad market is absolutely trouncing the housing sector stocks right now. The iShares Dow Jones U.S. Home Construction ETF has dropped 10% over the past three months. It’s up less than 6% on the year, compared to a 20% gain in the S&P 500.

Again, I don’t think we’re headed toward another blow-off top in the real estate market. Remember, homebuilders have been sitting on their hands for years. The number of completed new homes for sale remains at the lowest level ever recorded in 40 years of National Association of Home Builders data. You’ll have a chance to find value in homebuilder names somewhere down the line.

But right now, investors are looking elsewhere for gains. And unless you’re extremely patient and willing to sit through another leg lower, you should ditch these stocks until they begin to show signs of life once again…

Regards,

Greg Guenthner
for The Rude Awakening

You May Also Like:


Gold’s New Rally Begins Now

Greg Guenthner

In the blink of an eye, summer just got a lot more interesting. Try your best to ignore a sagging stock market for a minute. Today, I want to talk about the intense action we’re seeing in gold and gold miner stocks—and how you can play it.

Greg Guenthner

Greg Guenthner, CMT, is the managing editor of The Rude Awakening. Greg is a member of the Market Technicians Association and holds the Chartered Market Technician designation.

Recent Articles

A Quarter-Century’s Conclusion on Our Cancer Woes

Ray Blanco

Breakthrough technologies can hold the most undiscovered money-making potential. What we’ve accomplished in a quarter century with cancer research could make you serious money and save countless lives. Ray Blanco has more on this ground breaking story...


Give Your Book Away For Free, Make More Money

Chris Campbell

The publishing industry is on its head. These days, it makes more sense to make money before you write your book and give it away for free once you do. In today’s Laissez Faire Today, Chris Campbell shows you how to create a hit with those two counterintuitive steps. Read on…


How to Poke the Russian Bear in 3 Easy Steps

Greg Guenthner

Interested in buying the dip in Russian stocks this morning? Before you do, let’s try to knock some sense into that skull of yours. Late last week, I reminded you why we bid farewell to the big Russian bear back over the summer. At the time, Russia was one of the cheapest markets in the world. But cheap can always get even cheaper—and Russia is certainly no exception. With comic book supervillain Vlad Putin manning the controls from his secret Siberian lair, the Market Vectors Russia ETF (NYSE:RSX) has dropped a cold 20% since registering its late June highs. Does it have a shot at rebounding? Greg Guenthner explains…


Why Malpractice from the Fed Will Undermine Growth

Steve Forbes

The latest friend of ours to weigh in on the topic of the value of your money is Steve Forbes. As you’ve been reading this week, we paid a visit to Mr. Forbes recently, to discuss his latest book, Money. In this essay, you’ll find his thoughts on currency devaluation… it’s impact of economic growth and your investments…