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Well that didn’t take long! Shortly after I warned that the momentum darlings of this market — Apple (AAPL), Priceline.com (PCLN) and the like — looked ridiculously overvalued and increasingly vulnerable, they tanked.
Apple lost more than $65 per share, while Priceline lost almost $80. In fact, Apple lost more value in two days than at any point in the last 23 months! We’ll have to see if this is only a correction, or the end of the out-of-control, easy money-fueled run. I’m leaning toward the latter though, and I hope you’ve followed my advice on how to protect yourself!
Now, I want to shift the focus to another sector that I believe is at risk of a serious stumble … housing. Get a load of this comment I read earlier this week …
“Interest expressed by buyers in the past few months has yet to translate into expected sales activity.”
Then there’s the follow-up warning about …
“Ongoing challenges that are slowing the housing recovery — particularly tight credit conditions for builders and buyers, competition from foreclosures and problems with obtaining accurate appraisals.”
Who’s saying these things? Some noted housing bear? A guy like me — who accurately called the housing crash ahead of time, and who has repeatedly warned about the lack of vigor in the recent uptick in the housing numbers?
Nope. It’s from the Chief Economist of the National Association of Home Builders David Crowe! In other words, even the economist of the largest new housing industry trade group says the market remains relatively weak.
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| In recent statements, the Chief Economist and Senior VP for the NAHB did not have encouraging news. |
Numbers Don’t Lie —
the “Great Housing Recovery”
Is Anything But!
Why the change in tone? Simple. Numbers don’t lie, and the latest figures suggest the “great housing recovery” is anything but great! The NAHB’s builder confidence index just dropped three points to 25 in April from 28 in March. That missed economist forecasts for an unchanged reading by a mile.
The subindex that measures current sales fell three points to 29. Worse, the subindex that measures buyer traffic slumped four points to 18 — the lowest since December!
As if that weren’t enough, housing starts plunged 5.8 percent in March to a seasonally adjusted annual rate of 654,000. That followed a 2.8 percent decline a month earlier, and it left starts at the lowest level since October!
Building permits did climb. But the improvement was in large multifamily projects — likely apartment complexes, if my read of the data is correct. Single-family permitting slipped 3.5 percent, the first decline since September.
And to make bad things even worse, the National Association of Realtors said yesterday that existing home sales slipped 2.6 percent to an annual rate of 4.48 million units last month. Economists polled by Reuters had expected sales of 4.63 million units.
I’ve said it before, and I’ll say it again: Conditions have improved marginally in recent months, driven mostly by some of the warmest weather on record. But because we had a very early START to the spring selling season, we’re going to have an early END to it. Heck, the latest figures suggest it may already be petering out.
The Investing Implications
for You …
One of the strongest sectors of the stock market, besides the momentum darlings, has been housing — or anything related to it. Paint companies have been trading like dot-coms, while home improvement retailers have been acting like it’s the middle of the housing bubble again!
But I’d bet dollars to donuts that all the Johnny-come-lately mutual fund managers who have dogpiled into these stocks are going to suffer a nasty fate. I wouldn’t be surprised to see names like Home Depot (HD), Lowe’s (LOW), Lennar (LEN), and D.R. Horton (DHI) suffer the same kind of spills that we’re already seeing in stocks like Apple and Priceline.com.
So please, if you own these names, do me a favor and get out of ’em before it’s too late! I would also be on the lookout for a worsening in the economic data as the spring progresses, and a potential slump in the broader market as a result!
Until next time,
Mike
P.S. Stay clear of housing-related stocks is exactly the advice I’ve given my Safe Money members. Plus I’ve recommended an investment that is meant to rise as real estate prices fall. Click here to learn how to join for just 12 cents a day.
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
{ 11 comments }
I don’t know if you’re going to be right or not.I do know that if housing starts declining again,it’s going to be the largest negative event to effect the economy.Likely,if you are correct,the Fed,run by a very inflation oriented Bernanke,is going to crank up the printing presses.That would be bullish for gold.
Hi Mike
The reasons I believe we are in trouble are real long term employment and wage growth, genuine consumer confidence, country wide lack of real productive focus, poor economic leadership, out of control debt and uninspiring leadership. Dear old Ben doesn’t even know where to start. Now someone wants us to vote for this?
Regards
Hi Mike here in Vegas the realtors says the buyers are bidding up the price of the houses that are for sale and IT IS CRAZY if there is a nice house price at ..70k the ones that used to go for 300k they say it has at least 10 bids and usually sells for close to a 100k ???? plus the banks are holding the SHADOW inventory so they can sell this houses for a larger price… so I guess there will be a second wave of foreclosures coming in the near future and maybe in 2017 there will be a BOTTOM to the housing crisis…
Im seeing something that is absolutely frightening, that homes that are in LIS PENDENS status are overwhelming , there are now more homes in LIS PENDENS than foreclosures at a rate of 3/1 so in other words there are now 3 x more homes in preforeclosure than in foreclosure this is going to translate to more homes being sold as REOS in the future which means a larger % drop in existing homes TAV which just means more people being upside down in their mortgages which in turn will create more preforeclosures and foreclosures and REOS I see the banks are again saying they might need some help.
It takes many years to unwind a housing bubble. Meanwhile, we’ll see deflation,not inflation in all asset classes — stocks are next!
The failing market, over printing in every government’s central banks and houses/business getting taken by the banks are what the largest Central banks want….think about it…they swoop in and buy everything up for pennies, bail out countries who are busted knowing those same countries can’t pay back those same loans and poof….IMF and the Central Central bank controls all while the smallest banks go under. There is a much larger problem here and hopefully one day, these banks will get shutdown as they are all owned by the same families who setup WTO and WHO.
Hey you lot, you think you have problems, we here in Australia are about to be CHARGED for the very AIR we breath and it’s called the CARBON TAX! can you believe that, well it’s true, this rotten Goverment over here and I didn’t vote for this thing of a women, is actually getting it through to stiffen us Aussie’s.So at least you haven’t got this new TAX coming down on you.
Aussie
Australia is also about to get a super profits tax to suck money out of the pockets of share holders. Australia has the most hopeless federal government in living memory on their way to being the next Greece borrowing $100million per day. Doesn’t sound like much at the moment but it builds quickly.
Hey, Mike!!!!……great advice, recommending everyone sell all their APPL…..ya..dat was a good one…right on target agin, young man.,..gosh…yer the best…
Please, Mike…tell us all more about APPL??….and..muni-bonds…afterall..yer a self-proclaimed “bond guy”
…but..first…tell us again about selling APPL???..
Please Mike….after APPL raises the divy, tell us again what a good deal it was to sell all of our APPL???…..golly…yer the best…..sound advice based on no facts at all…