As I’ve traveled last 2 weeks, and tried to keep clear off stocks and markets, one thing I could not help look out for is the anecdotal evidence on housing… and down in Dallas, the housing is going gangbusters, at least in areas where homes are priced at $400K and above.
Foreclosed units are virtually all gone and real-estate agents are stumping all over to offer a guaranteed price and a sale within specified time and often they just end up buying the home and getting a better price for themselves.
Again, this is anecdotal evidence but if used homes are in such demand in such a large state, new housing ought to be able to exploit these pricing pressures and jack up prices.
Now back home, in Michigan, as I was driving into my subdivision, the promo on the builders banner listed a price that was $10K higher than the week before when I departed.
As a nervous holder of Lennar (LEN) stock, such anecdotal evidence sooths the anxiousness because virtually all housing names appear overextended, unless the future is rosier than what the market is pricing.
Eventually, though, all of these housing names, including LEN, will be a subject to a sell-off, because as we approach some critical market levels – circa 14,250 on Down – all of the names will be subject to a sell off.
Meanwhile, to get to that Dow level, which we talked about back in September of last year (read it here), we will need the banks to move higher.
Having in mind that the stocks are not done going higher, and the likelihood that in this last leg the banks will likely go up as well, one other thing I did last week was to add to my BofA (BAC) and Citigroup (C) positions. These two names are the most undervalued among the big-box gambling houses, at least based on their price per book, while sporting a nice price chart that is suggestive that the consolidation action (sideways) is closer to a move in some direction, likely higher in this case.
Finally, the ferocity of this ongoing rally should become a worry once we go into a sell-off phase because these 1,000 points built on no bumps higher could just as easily get retraced back because there are no bumps on the way down.
For a good reading on the market issues, below are some stories:
- New Highs in Sight, Barron’s
- Don’t Be Fooled by the GDP Report: The Economy Is Gaining Strength, Morningstar
- No, there probably isn’t a bond bubble, Washington Post