Is This The Bottom For Housing Stocks ?

The housing market is definitely in deep recession. Every now and then pumpers try to convince retail investors that housing has bottomed, and this is the time to start buying housing stocks. CNN Money covers an article stating how experts completely got housing wrong. Another interesting article about the bottom can be found here.

The best way to come to a conclusion is to go over some facts.

  1. Today sales of new homes plummeting 9% month to month to their lowest level in more than 12 years to a seasonally adjusted annual sales pace of 647,000. This slump was worse than analysts expected.
  2. Over the last 12 months, new-home sales nationwide have tumbled by 34.4%, the biggest annual slide since early 1991, and stark evidence of the painful collapse in the once high-flying housing market.
  3. The median sales price of a new home dipped to $239,100 in November. That is 0.4% lower than a year ago.
  4. Would-be home buyers have found it more difficult to secure financing, especially for “jumbo” mortgages. The tighter credit situation is deepening the housing slump. A lot of borrowers are being disqualified for loans.
  5. Mortgage application volume dropped 7.6%, despite a drop in interest rates.
  6. Unsold homes have piled up, which will force builders to cut back even more on construction and give deeper discounts to lure prospective buyers.
  7. Foreclosures have soared to record highs and probably will keep rising.
  8. The current inventory will take minimum 18 months to be consumed.

Knowing these facts, i truly believe housing stocks have not bottomed. Even if I am wrong, it would atleast take a year or two before the home builders can show positive earnings. Once the house prices stablize, it would stay flat for a while before it can pick up. That means we wont see any growth from housing stocks for a while. So why then indulge yourself into buying housing stocks thinking it is the bottom ?

Recommendation: Do not believe the speculators and pumpers/dumpers to tell you about picking housing stocks. Go over the facts and either stay away or stay short.

Disclosure: Short bunch of housing stocks.