Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Three U.S. Homebuilders to Short During $336-Billion Housing Gap

Housing-Market / Housing Stocks Mar 04, 2014 - 01:10 PM GMT

By: DailyGainsLetter

Housing-Market

John Paul Whitefoot writes: I hate to harp on the U.S. housing market so much, but it is a major indicator of the health of the U.S. economy. Following previous recessions, investment in the U.S. housing market increased early on and helped drive the recovery. In fact, the U.S. housing market was a major factor that helped lift the U.S. economy out of past recessions in 1981, 1990, and 2001. But it isn’t happening this time around.


According to the National Association of Home Builders, the U.S. housing market contributes to the country’s gross domestic product (GDP) in two ways: private residential investment and consumption spending on housing services. Historically, residential investment, which includes construction of new single-family and multi-family structures, residential remodeling, the production of manufactured homes, and brokers’ fees, has averaged around five percent of U.S. GDP. (Source: “Housing’s Contribution to Gross Domestic Product (GDP),” National Association of Home Builders web site, last accessed March 3, 2014.)

Housing services, which includes gross rent, utility payments, and imputed rent (an estimate of how much it would cost to rent owner-occupied units), averages between 12% and 13%. That leads to a combined total of 17%–18%.

But the U.S. housing market has been falling short as an engine of economic growth. In 2005, residential investment accounted for 6.1% of U.S. GDP. In 2012, it accounted for just 2.8%, and it has averaged just three percent since then—meaning that two percent of the national GDP is missing from private residential investment.

More broadly, since the U.S. housing market collapsed in 2008, the industry has made less than half its normal contribution to U.S. economic growth. According to the United States Census Bureau’s second estimate, total U.S. GDP for 2013 will come in close to $16.8 trillion—that means the missing two percent of private residential investment translates into a lost $336 billion.

Collectively, private residential investment and consumption spending accounts for 15.3% of total U.S. GDP growth, significantly less than the 17%–18% average. And the most recent U.S. housing market data continues to suggest that actual growth is still on the horizon.

Pending sales of U.S. homes climbed just 0.1% month-over-month to 95.0 in January—a far cry from the 2.9% growth analysts were projecting and virtually unchanged at a two-year low. This comes on the heels of a 5.8% drop in December and is nine percent below the January 2013 reading of 104.4.

Like most, the National Association of Realtors (NAR) is blaming the weak data on the weather. But even that is a little suspect. Pending home sales in the winter-ravaged Northeast rose 2.3% month-over-month in January, but they’re still 5.3% below January 2013’s sales. Pending home sales in the South increased 3.5%, 5.5% lower than a year ago. In the Midwest, the index slipped 2.5% and is 9.3% lower than a year ago. In the balmy West, the index fell 4.8% and is an eye-watering 17.5% below January 2013.

Interestingly, in its press release, the NAR optimistically proclaimed, “Pending Home Sales Hold Steady in January.” This is a little disconnected from the notion that the U.S. housing market is both healthy and not in a bubble. (Source: “Pending Home Sales Hold Steady in January,” National Association of Realtors web site, February 28, 2014.)

As a result, “holding steady” is a pretty bad economic indicator of U.S. housing sales in February and March, especially when you take into consideration that forecasters were predicting a 2.9% month-over-month change, but instead, the U.S. economy was gifted just 0.1%. To put it another way, if I was expecting $2,900 and was given just $100.00, I’d be a little miffed.

Weak pending U.S. housing market sales might have more to do with higher borrowing costs, low supply, and increasing home values than the weather.

D.R. Horton, Inc. (NYSE/DHI), Lennar Corporation (NYSE/LEN), and PulteGroup, Inc. (NYSE/PHM) are three homebuilders looking for the U.S. housing market to turn around on the long-term investing horizon. In the meantime, those investors who believe the U.S. housing market will continue to experience downward pressure could consider shorting these same stocks.

This article Three Homebuilders to Short During $336-Billion Housing Gap was originally published at Daily Gains Letter

© 2014 Copyright Daily Gains Letter - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in