Housing Heals Before Contracting Lethal Infection

Much has been made about the latest increases in new and existing home sales, much too much. Modest increases in activity from dreadfully low levels during a period when seasonality should spur growth is a low-bar leap. Though, I think it is clear based on the data that the housing market is finally overcoming the burden of the bubble. More importantly, though, a storm is gathering over yonder, and the future concerns me more today than this past April can enthuse me. Today’s action in homebuilders and financials, with the SPDR S&P Homebuilders (NYSE: XHB) and Financial Select Sector SPDR (NYSE: XLF) each off more than 1%, seems to say that you finally agree. I’m glad to have you on board Mr. Market; now buckle up.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative tickers include Investors Title (Nasdaq: ITIC), Bank of America (NYSE: BAC), Freddie Mac (OTC: FMCC.OB), Fannie Mae (OTC: FNMA.OB), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), UltraShort Real Estate ProShares (NYSE: SRS), Ultra Real Estate ProShares (NYSE: URE), ING Clarion Global Real Estate Income Fund (NYSE: IGR), Xinyuan Real Estate Co. (NYSE: XIN), Rydex Real Estate Fund H (Nasdaq: RYHRX), T. Rowe Price Real Estate Fund (Nasdaq: TRREX), Hovnanian (NYSE: HOV) and Beazer Homes (NYSE: BZH).

Housing Healing, Facing Infection

New Home Sales were reported Wednesday for the month of April and Existing Home Sales were reported Tuesday for the same span. The XHB caught a breeze on the first report, but was unable to ride the hot air for a second day. The shares of homebuilders Toll Brothers (NYSE: TOL), Ryland Group (NYSE: RYL), PulteGroup (NYSE: PHM), K.B. Home (NYSE: KBH), D.R. Horton (NYSE: DHI) and Lennar (NYSE: LEN) were mixed Wednesday, though housing related shares were mostly lower. Some, like Toll Brothers (NYSE: TOL) benefitted from company specific news. Still, despite the market share driven rise of the like, I say buyer beware, because the macroeconomic environment will sink all cyclical ships. That’s why the modest increases in sales activity in April, while they do show real recovery in real estate, will draw no capital from my store today.

The U.S. Department of Housing and Urban Development reported a 3.3% increase in new home sales in April, but that only brought the annualized pace of sales up to a measly pace of 343K. Granted, that was 9.9% better than the pathetic production of April 2011.

Through years of attrition, the standing inventory of decaying new construction has dwindled, with 146K fresh homes estimated for sale currently, or 5.1 months supply at the current pace of sales. That’s again better than March’s 5.2 months and last April’s 6.7 months store. The pace of sales is finally benefiting from the clearance of the wreckage of the housing bubble (read foreclosed and bank owned property). This view is also supported by a median price increase seen in existing home sales, which arose last month on a better mix of properties sold. That data would indicate that there’s an increasing portion of non-distressed property selling through. The number of new homes for sale is thin against last April’s 174K, so the builders would be nicely positioned now if not for the distressed global macroeconomic environment that is offering contradicting information to the investment decision generally.

Existing Home Sales nearly equaled new home sales in their increase, rising 3.4% in April and 10% against the prior year. Single-family home sales, which for many better reflect the true American home market, rose 3.0% and were 9.9% higher than last year. Inventory was up, but the Chief Economist of the National Association of Realtors (NAR), Lawrence Yun, clarified why. He said that April historically drives and leads the year in homes for sale. This year, April marked a 9.5% increase in homes for sale, to 2.54 million. At the current pace of sales, that represents a 6.6-month supply, up from 6.2 in March.

Fear not (at least not about this), as home price data ensures that the increase was not driven by distressed properties, but by better demand drawing sellers. In fact, shortages have sprung up in the hardest hit areas, like Phoenix, Arizona and Las Vegas, Nevada. The median price of an existing home for sale was pulled higher by all this, rising 10.1% year-to-year, to $177,400. Again, this was due to the better mix of homes for sale, not general price increase, so don’t go betting on a new housing lust because of it. Yet, other data-points also showed a change for the better. All-cash sales fell to 29% of transactions in April, down from 32% in March. Investors accounted for 20% of all purchases, versus 21% in March. And first-time buyers rose to 35% of all purchasers in April from 33% in March. These are all signs of a normalizing and recovering market.

Congratulations real estate market, you’re getting better just as we contract a lethal infection from European trash. It’s like recovering from illness, but contracting a dangerous disease just before your release from the hospital. All this good news about April is enthusing, but the latest data out of the Mortgage Bankers Association shows a slowing of mortgage application activity for home purchases in May, despite record low mortgage rates. Oh, Americans are benefiting from European strife by refinancing and lowering their debt costs, but they’re not buying homes according to the latest data from the MBA. Why do you suppose that is, if all is really hunky-dory? It’s the economy stupid!

I must have said it a million times over the last year, but Mr. Market is finally listening. America sells 20% of its exported goods into Europe, which just barely kept out of formal recession territory in the first quarter. Meanwhile, economic bifurcation has driven political fragmentation, which now threatens to break apart the euro-zone. The first effects of economic contagion have been felt from China to the United States, and our still vulnerable economy seems to be sniffling more and more. It’s precisely the wrong time to start a war, and yet, the pressure is intensifying upon one of the world’s most important suppliers of fuel, which also has the ability to disrupt an even more important spigot. Investors are selling stocks? Go figure!

Editor's Note: Article should interest investors in Investors Title (Nasdaq: ITIC), Bank of America (NYSE: BAC), Freddie Mac (OTC: FMCC.OB), Fannie Mae (OTC: FNMA.OB), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), UltraShort Real Estate ProShares (NYSE: SRS), Ultra Real Estate ProShares (NYSE: URE), ING Clarion Global Real Estate Income Fund (NYSE: IGR), Xinyuan Real Estate Co. (NYSE: XIN), Rydex Real Estate Fund H (Nasdaq: RYHRX), T. Rowe Price Real Estate Fund (Nasdaq: TRREX), Toll Brothers (NYSE: TOL), Hovnanian (NYSE: HOV), D.R. Horton (NYSE: DHI), Beazer Homes (NYSE: BZH), Lennar (NYSE: LEN), K.B. Homes (NYSE: KBH), Pulte Homes (NYSE: PHM), NVR Inc. (NYSE: NVR), Gafisa SA (NYSE: GFA), MDC Holdings (NYSE: MDC), Ryland Group (NYSE: RYL), Meritage Homes (NYSE: MTH), Brookfield Homes (NYSE: BHS), Standard Pacific (NYSE: SPF), M/I Homes (NYSE: MHO), Orleans Homebuilders (AMEX: OHB), Vanguard REIT Index ETF (NYSE: VNQ), PNC Bank (NYSE: PNC), J.P. Morgan Chase (NYSE: JPM), Hooker Furniture (Nasdaq: HOFT), Ethan Allen (NYSE: ETH), Pier 1 Imports (NYSE: PIR), Williams Sonoma (NYSE: WSM), Home Depot (NYSE: HD), Lowes (NYSE: LOW), Nasdaq: XNFZX, Nasdaq: FSAZX, Avatar Holdings (Nasdaq: AVTR), Apartment Investment & Management (NYSE: AIV), Equity Residential (NYSE: EQR), Avalonbay Communities (NYSE: AVB), UDR Inc. (NYSE: UDR), Essex Property Trust (NYSE: ESS), Camden Property Trust (NYSE: CPT), Senior Housing Properties (NYSE: SNH), BRE Properties (NYSE: BRE), Home Properties (NYSE: HME), Mid-America Apartment (NYSE: MAA), Equity Lifestyle Properties (NYSE: ELS), American Campus Communities (NYSE: ACC), Colonial Properties (NYSE: CLP), American Capital Agency (Nasdaq: AGNC), Sun Communities (NYSE: SUI), Associated Estates (NYSE: AEC), PennyMac Mortgage (NYSE: PMT), Two Harbors (AMEX: TWO), Simon Property Group (NYSE: SPG).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Real Estate or Stocks in 2012?

How does an investor assess risk? How does an investor identify potential problems with the stocks of the firms in one's portfolio? For instance, is there exposure to Greece, Spain, Ireland or Turkey? Will the company experience parts shortages from Japan or Myanmar? What are the currency implications of an appreciating or depreciating US Dollar on corporate profits? Can the record profits be repeated year after year, after year, to justify the P/E that reflects that same growth? Labor problems in China, union problems in Europe, and fluctuating transportation and commodity costs exasperate attempts at research. Most of these issues are outside of the average investor’s ability to foresee or control. Furthermore, the stock market's movements seem to be faster going down than going up; months of steady improvement can be destroyed in the matter of a few days, causing extreme angst.

Relative tickers: SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY), PowerShares QQQ Trust (Nasdaq: QQQ), ProShares Short Dow 30 (NYSE: DOG), ProShares Ultra Short S&P 500 (NYSE: SDS), ProShares Ultra QQQ (NYSE: QLD), NYSE Euronext (NYSE: NYX), The NASDAQ OMX Group (Nasdaq: NDAQ), Intercontinental Exchange (NYSE: ICE), E*Trade Financial (Nasdaq: ETFC), Charles Schwab (Nasdaq: SCHW), Asset Acceptance Capital (Nasdaq: AACC), Affiliated Managers (NYSE: AMG), Ameriprise Financial (NYSE: AMP), TD Ameritrade (Nasdaq: AMTD) and Calamos Asset Management (Nasdaq: CLMS).

Real Estate or Stocks?

With the possibility of a global recession and a European depression, the prospects for stocks seem to be limited. Opinions range from a mild downturn to an economic collapse; however, there are very few forecasting an immediate return to global growth. The financial and social burden caused by debt is escalating as additional debt is used to service existing debt, compounding the problem. Tax revenue is being diverted from essential social services and fiscal incentives used to promote employment to totally non-productive interest payments. As more debt is added, the portion of the revenue collected and allocated to debt service is expanding exponentially.

The world’s governments are essentially borrowing at 0%, but when the repression of rates comes to an end, rates will rise to their true market level and the debt service will overwhelm the economies of the globe. Rates have been artificially lowered to force conservative cash into the economy in search of a riskier return, but eventually true market forces will prevail and the ensuing result will be explosive. Holders of Treasury Bonds have enjoyed extraordinary returns, receiving both interest payments and capital gains as rates have been driven down by the Federal Reserve's “Operation Twist”. Holders of Greek, Spanish, Portuguese, and Italian bonds felt very comfortable just a mere 24 months ago, but now things are radically different for them. Understandably, Treasury Bonds offer protection from a deflating environment, and while backed by the world's reserve currency their safety should be assured. The key word here is “should”. There exist two possibilities of which neither is pretty!

Currently, the 30-year Treasury Bond rate is 3%. The Federal Reserve has been pushing the rate down; a slight rise to 4% would significantly reduce the value of the bond. Should the rates rise to 5% or 6%, which is a more normal rate historically speaking, the ensuing capital loss could be as high as 50%. If inflation or even inflationary expectations started to brew, the losses could be staggering. Events across Europe could force weaker nations to seek “bankruptcy protection,” and default on their debt. Chaos would ensue, but eventually order would be restored and a pathway to recovery established.

The calamity of a default might be considered the lesser of two evils. Default and nine months of chaos may be preferable over 10 to 20 years of austerity. Should default become an acceptable option, then a cascade of nations, provinces, states, municipalities, localities, councils, and corporations could default. It is then not totally unthinkable that our great reserve currency might also default to preserve its integrity. As unthinkable as a global default might be, it is a possibility that needs to be considered, as it would allow for recovery.

Accompanying recovery would be inflation, as everything would be adjusting to new currency values and things would be in demand. Perhaps the rise of gold and silver over the last decade in an obviously deflating economy is forecasting turmoil in fiat currency and government obligations. Commodities would eventually recover: gas, oil, minerals, lumber, farms, food, water, shelter, etc., causing inflation and further pressuring debt instruments. The silver lining of a default would be the balancing of budgets worldwide with a path to recovery unveiled. This recession that has started in Europe is different from past downturns; it is not controlled by the Federal Reserve regulating rates and money supply. This is a potential cyclic event to correct global excesses.

Long-term treasuries still offer protection of capital in a very uncertain world. They still provide a small income stream to supplement other revenue sources. A portfolio of bonds needs to be risk managed and an “exit strategy” needs to be in place. Should the U.S. slide into recession, interest rates on 30-year bonds could slide even further producing capital gains. However, there will be a time to take profits and not look back. Another advantage of the repression of rates caused by the Federal Reserve is the opportunity to lock in long-term money and leverage cash flowing rentals.

Ironically, the Real Estate Market may be the asset class that preserves and grows wealth. Real estate as an asset class has been devastated and much of the risk of decline has been mitigated by the severe market correction of the past few years. Population pressure will eventually absorb all of the excess and pockets of shortages that are starting to appear most notably in my home market of Phoenix, AZ, one of the most affected markets in the nation. The strategy to employ would be to accumulate rentals in second and third move-up properties in discounted markets with good forward growth prospects, and use current low interest 30-year fixed rate mortgages finance them. The possibility of rising rates and/or market turmoil will curtail new construction and positively enhance the existing housing market. Furthermore, Cap Rates of 5-7% are available increasing to 8-10% cash on cash with use of a simple Fixed Rate Mortgage. This cash flow will be exceptionally important in any economic slowdown as rates will continue to compress and yield will become elusive.

A key component of a 5-year holding horizon is the inflation protection afforded by the “real” in real estate, as well as the growth in revenue potential as scarcities develop. The revenue stream may become of utmost importance as other traditional sources of revenue and paid benefits are curtailed or jeopardized: CD's, money markets, insurance guaranteed annuities funded by sovereign debt, state and municipal pensions may also be at risk if defaults occur. Cuts in Social Security and Medicare may be needed to reduce entitlement costs. Distressed properties discounted below replacement cost are still available, but financial institutes are working hard to clear the properties and take the losses this year. Any “underwater” residence or non-cash flowing investment property needs to be reviewed for liquidation via the “short sale” process while the market is still viable. Looking forward, costs are to be cut, debt is to be reduced, and reserves accumulated.

Article should interest investors in SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY), PowerShares QQQ Trust (Nasdaq: QQQ), ProShares Short Dow 30 (NYSE: DOG), ProShares Ultra Short S&P 500 (NYSE: SDS), ProShares Ultra QQQ (NYSE: QLD), NYSE Euronext (NYSE: NYX), The NASDAQ OMX Group (Nasdaq: NDAQ), Intercontinental Exchange (NYSE: ICE), E*Trade Financial (Nasdaq: ETFC), Charles Schwab (Nasdaq: SCHW), Asset Acceptance Capital (Nasdaq: AACC), Affiliated Managers (NYSE: AMG), Ameriprise Financial (NYSE: AMP), TD Ameritrade (Nasdaq: AMTD), BGC Partners (Nasdaq: BGCP), Bank of New York Mellon (NYSE: BK), BlackRock (NYSE: BLK), CIT Group (NYSE: CIT), Calamos Asset Management (Nasdaq: CLMS), CME Group (NYSE: CME), Cohn & Steers (NYSE: CNS), Cowen Group (Nasdaq: COWN), Diamond Hill Investment (Nasdaq: DHIL), Dollar Financial (Nasdaq: DLLR), Duff & Phelps (Nasdaq: DUF), Encore Capital (Nasdaq: ECPG), Edelman Financial (Nasdaq: EF), Equifax (NYSE: EFX), Epoch (Nasdaq: EPHC), Evercore Partners (NYSE: EVR), EXCorp. (Nasdaq: EZPW), FBR Capital Markets (Nasdaq: FBCM), First Cash Financial (Nasdaq: FCFS), Federated Investors (NYSE: FII), First Marblehead (NYSE: FMD), Fidelity National Financial (NYSE: FNF), Financial Engines (Nasdaq: FNGN), FXCM (Nasdaq: FXCM), Gamco Investors (NYSE: GBL), GAIN Capital (Nasdaq: GCAP), Green Dot (Nasdaq: GDOT), GFI Group (Nasdaq: GFIG), Greenhill (NYSE: GHL), Gleacher (Nasdaq: GLCH), Goldman Sachs (NYSE: GS), Interactive Brokers (Nasdaq: IBKR), INTL FCStone (Nasdaq: INTL), Intersections (Nasdaq: INTX), Investment Technology (NYSE: ITG), Invesco (NYSE: IVZ), Jefferies (NYSE: JEF), JMP Group (NYSE: JMP), Janus Capital (NYSE: JNS), KBW (NYSE: KBW), Knight Capital (NYSE: KCG), Lazard (NYSE: LAZ), Legg Mason (NYSE: LM), LPL Investment (Nasdaq: LPLA), Ladenburg Thalmann (AMEX: LTS), Mastercard (NYSE: MA), Moody’s (NYSE: MCO), MF Global (NYSE: MF), Moneygram (NYSE: MGI), MarketAxess (Nasdaq: MKTX), Marlin Business Services (Nasdaq: MRLN), Morgan Stanley (NYSE: MS), MSCI (Nasdaq: MSCI), MGIC Investment (NYSE: MTG), NewStar Financial (Nasdaq: NEWS), National Financial Partners (NYSE: NFP), Nelnet (NYSE: NNI), Northern Trust (Nasdaq: NTRS), NetSpend (Nasdaq: NTSP), Ocwen Financial (NYSE: OCN), Oppenheimer (NYSE: OPY), optionsXpress (Nasdaq: OXPS), PICO (Nasdaq: PICO), Piper Jaffray (NYSE: PJC), PMI Group (NYSE: PMI), Penson Worldwide (Nasdaq: PNSN), Portfolio Recovery (Nasdaq: PRAA), Raymond James (NYSE: RJF), SEI Investments (Nasdaq: SEIC), Stifel Financial (NYSE: SF), Safeguard Scientifics (NYSE: SFE), State Street (NYSE: STT), SWS (NYSE: SWS), T. Rowe Price (Nasdaq: TROW), Visa (NYSE: V) and Virtus Investment Partners (Nasdaq: VRTS).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Mortgage Refinancing Opportunity Born of Greek Strife

The troubles of Greece and Europe make for terrifying television indeed, and the horrible effects to real human life over there is difficult to bear. Yet, for many Americans, the effects to mortgage rates have been a Godsend. A flight to safety over the last week has driven U.S. Treasury demand, leading yields lower. As a result, mortgage rates have reached their lowest point in the history of the Mortgage Bankers Association (MBA) Weekly Application Survey. The MBA is already reporting a response in refinancing activity, which stands to benefit aggressive bankers, while lowering the cost of living for many Americans.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative tickers include Bank of America (NYSE: BAC), J.P. Morgan Chase (NYSE: JPM), Wells Fargo (NYSE: WFC), Citigroup (NYSE: C), Fannie Mae (OTC: FNMA.OB), Freddie Mac (OTC: FMCC.OB), U.S. Bancorp (NYSE: USB), PHH Corp. (NYSE: PHH), Flagstar (NYSE: FBC) and BB&T (NYSE: BBT).

Americans Find Mortgage Refinancing Opportunity

In the week ending May 11, 2011, the MBA’s Market Composite Index of mortgage application volume increased 9.2% on a seasonally adjusted basis. Behind the rise was a 13% drive higher in refinancing activity, as mortgage rates dipped into record territory across the spectrum of loan types.

Each loan type marked record territory and saw effective rate decrease, except for FHA sponsored loans, which saw an effective rate rise. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.96 percent, from 4.01 percent. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.20 percent, from 4.29 percent. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.75 percent, from 3.81 percent. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.26 percent, from 3.29 percent.

Over the last six months, mortgage refinancing has increased by 50% on the Home Affordable Refinance Program (HARP), driven by Fannie Mae (OTC: FNMA.OB) and Freddie Mac (OTC: FMCC.OB). The program was designed to assist homeowners in refinancing their mortgages even if they owe more money than the home’s current value. Something like a third of all refinancing applications have been HARP driven lately. However, over the last week, the MBA reports the HARP share of refinances fell to 28%, from 30%, as conventional refinancing increased 14% on the week versus the 4% increase of HARP driven activity. This is the direct result of the drop in mortgage rates.

The nation’s most important mortgage originators in 2011 ranked Wells Fargo (NYSE: WFC), Bank of America (NYSE: BAC), J.P. Morgan Chase (NYSE: JPM), Citigroup (NYSE: C), Ally, PHH Corp. (NYSE: PHH), U.S. Bancorp (NYSE: USB), Quicken, Flagstar Bancorp (NYSE: FBC) and BB&T (NYSE: BBT). Perhaps helped by today’s MBA news, the shares of the top four were up between 1% and 2%.

Still, purchase activity, or mortgage applications filed for the purchase of a home, decreased 4.2% on a seasonally adjusted basis last week. While refinancing is booming, the housing market remains sickly, and I just suggested homebuilder shareholders take profits on Tuesday’s builder confidence inspired climb higher for stocks including Toll Brothers, Ryland Group and others.

While it’s a shame that the driver of the day’s helpful mortgage activity is the direct result of the strife of others overseas, Americans might help themselves now by lowering their cost of living. Considering the economic situation I see developing, it’s all the more a good idea.

Editor's Note: Article should interest investors in Bank of America (NYSE: BAC), Freddie Mac (OTC: FMCC.OB), Fannie Mae (OTC: FNMA.OB), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), BB&T (NYSE: BBT), CIT (NYSE: CIT), Bank United (NYSE: BKU), First Citizens (OTC: FCNCA.PK), Synovus (NYSE: SNV), United Bankshares (Nasdaq: UBSI), Hampton Roads Bankshares (Nasdaq: HMPR), WesBanco (Nasdaq: WSBC), City Holding (Nasdaq: CHCO), Sandy Spring (Nasdaq: SASR), First Citizens (OTC: FCBN.OB), SCBT Financial (Nasdaq: SCBT), Wilmington Trust (NYSE: WL), WSFS Financial (Nasdaq: WSFS), Southside Bancshares (Nasdaq: SBSI), Stellar One (Nasdaq: STEL), Union First Market (Nasdaq: UBSH), Eagle Bancorp (Nasdaq: EGBN), First Bancorp (Nasdaq: FBNC), Ameris (Nasdaq: ABCB), The Bancorp (Nasdaq: TBBK), First Community (Nasdaq: FCBC), Capital City (Nasdaq: CCBG), Financial Institutions (Nasdaq: FISI), National Bankshares (Nasdaq: NKSH), Citizens & Northern (Nasdaq: CZNC), Charter Financial (Nasdaq: CHFN), Seacoast Banking (Nasdaq: SBCF), TIB Financial (Nasdaq: TIBB), American National (Nasdaq: AMNB), United Community (Nasdaq: UCBI), Middleburg Financial (Nasdaq: MBRG), Heritage Financial (Nasdaq: HBOS), Zions Bancorp (Nasdaq: ZION), East West Bancorp (Nasdaq: EWBC), City National (NYSE: CYN), Bank of Hawaii (NYSE: BOH), SVB Financial (Nasdaq: SIVB), Westamerica (Nasdaq: WABC), Cathay General (Nasdaq: CATY), Umpqua (Nasdaq: UMPQ), Glacier Bancorp (Nasdaq: GBCI), Pacific Capital (Nasdaq: PCBC), PacWest (Nasdaq: PACW), Western Alliance (NYSE: WAL), First National Alaska (OTC: FBAK.OB), First Interstate Bancsystem (Nasdaq: FIBK), Nara (Nasdaq: NARA), West Coast (Nasdaq: WCBO), TriCo (Nasdaq: TCBK), Territorial (Nasdaq: TBNK), Washington Banking (Nasdaq: WCBO), Bank of Marin (Nasdaq: BMRC), Hanmi (Nasdaq: HAFC), PNC Bank (NYSE: PNC), J.P. Morgan Chase (NYSE: JPM), United Bankshares (Nasdaq: UBSI), Bank of New York Mellon (NYSE: BK), MB Financial (Nasdaq: MBFI), Astoria Financial (NYSE: AF), New York Community (NYSE: NYB), Hudson City (Nasdaq: HCBK), People’s United (Nasdaq: PBCT), First Niagra (Nasdaq: FNFG), Capitol Federal (Nasdaq: CFFN), Washington Federal (Nasdaq: WFSL), Investor’s Bancorp (Nasdaq: ISBC), Northwest Bankshares (Nasdaq: NWBI), Sterling Financial (Nasdaq: STSA), Ocwen (NYSE: OCN), Flagstar (NYSE: FBC), Provident (NYSE: PFS), Colombia Banking (Nasdaq: COLB), Kearny (Nasdaq: KRNY), Brookline (Nasdaq: BRKL), Dime Community (Nasdaq: DCOM), Flushing Financial (Nasdaq: FFIC), Danvers (Nasdaq: DNBK).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Homebuilders Benefitting from Market Share Gains

The differences in economic data between and within some of the metrics of the housing industry, offer evidence of a value added trend for the publicly traded homebuilders. They are the beneficiaries of an important industry factor change, and will likely lead the real estate market in recovery as a result. This is not a new statement by your author by far, but it is the first dedicated article to the important issue.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Homebuilder Market Share

Many of the publicly traded homebuilders have and will gain market share into the next upturn of the business cycle. The benefits of such change should be akin to a nitrogen boost for a drag racer’s speed machine. That said, I continue to warn that more broader reaching market shock via an Iran event and the more easily envisioned contagion from European recession, should offer new stumbling block for the economy, for single-family housing generally and for cyclical high-beta shares especially; that is inclusive of the homebuilders and despite the important industry factor value add.

This, like all investment sectors, is a dynamic and complex environment that should never be simplified by blank statements and vague descriptions. Thus, you are wise to assess the value of your advisors and the authors of articles and reports based on how well they see the entirety of each dynamic investment option.

The complexity of the industry is why we see such ups and downs for the homebuilder shares of late. Real estate data has been mixed, and is confusing for those who do not understand the very important point being made through this report. New Home Sales data offered the latest neck jerk for shareholders of homebuilders, with the SPDR S&P Homebuilders (NYSE: XHB) up 1% Tuesday. The report indicated the pace of new home sales improved to 328K in March, which exceeded the consensus of economists’ forecast for 318K. Furthermore, February’s tally was ratcheted higher to 353K, up from the initially reported pace of 313K. Also, the latest count was 7.5% more than last March. The shares of PulteGroup (NYSE: PHM), K.B. Home (NYSE: KBH), D.R. Horton (NYSE: DHI), Beazer (NYSE: BZH) and Toll Brothers (NYSE: TOL) were all higher by 2% to 4% on the news. Likewise, builder supply shares like that of USG (NYSE: USG), Masco (NYSE: MAS), Owens-Corning (NYSE: OC) and Mohawk Industries (NYSE: MHK) were up to a similar degree.

Yet, just a few days prior, disappointing real estate data in the form of Existing Home Sales for March sent the shares lower. Before that a tough Housing Starts report, highlighting regional variances and a multi-family drop, also weighed on housing stocks. Also last week, the Housing Market Index showed general builder sentiment had fallen after several months of improvement. What’s it all mean?

Investors in these stocks should realize that many factors will play roles in their operational performance. For instance, multi-family projects project the harsh reality that many Americans can no longer qualify for home ownership and are moving into rental property. However, this data influences overall activity positively, and while it helps support building product supply companies, it means little for the builders of single-family or other housing for home ownership.

Existing home sales data continues to reflect a difficult real estate environment on the whole, and builder confidence reflects the general level of activity and the mood of many decimated smaller undercapitalized builders. Yet, many publicly traded homebuilders like D.R. Horton, which reported this week higher revenues, earnings, closings and orders, are providing pleasing results. This is leaving many housing stock investors confused, if not suffering from whiplash.

A major driver of the differences between the performance and moods of housing segments and individual builders is the result of a shake-up that happened in the building industry through the real estate crisis. As in every cycle, highly levered and mostly overenthusiastic smaller builders found themselves in a tough spot when the market collapsed. Given the depth, degree and length of the current downturn in real estate, the shake-out has been exceptional. The result is fewer builders in position to capitalize on any new demand, and so the fewer numbers of builders are garnering a larger percentage of business. So even while the aggregate results remain depressing in real estate, the improvements are magnified within the short list of capable and capitalized builders.

Once again, it is my pleasure to make some sense of a complicated matter for my friends and followers. Please follow me here and subscribe to our email distribution at the blog, as I do my best to add value to your investment decision making and economic understanding.

Editor's Note: Article should interest investors in Investors Title (Nasdaq: ITIC), Freddie Mac (OTC: FMCC.OB), Fannie Mae (OTC: FNMA.OB), UltraShort Real Estate ProShares (NYSE: SRS), Ultra Real Estate ProShares (NYSE: URE), ING Clarion Global Real Estate Income Fund (NYSE: IGR), Xinyuan Real Estate Co. (NYSE: XIN), Rydex Real Estate Fund H (Nasdaq: RYHRX), T. Rowe Price Real Estate Fund (Nasdaq: TRREX), Toll Brothers (NYSE: TOL), Hovnanian (NYSE: HOV), D.R. Horton (NYSE: DHI), Beazer Homes (NYSE: BZH), Lennar (NYSE: LEN), K.B. Homes (NYSE: KBH), Pulte Homes (NYSE: PHM), NVR Inc. (NYSE: NVR), Gafisa SA (NYSE: GFA), MDC Holdings (NYSE: MDC), Ryland Group (NYSE: RYL), Meritage Homes (NYSE: MTH), Brookfield Homes (NYSE: BHS), Standard Pacific (NYSE: SPF), M/I Homes (NYSE: MHO), Orleans Homebuilders (AMEX: OHB), Vanguard REIT Index ETF (NYSE: VNQ), Hooker Furniture (Nasdaq: HOFT), Ethan Allen (NYSE: ETH), Pier 1 Imports (NYSE: PIR), Williams Sonoma (NYSE: WSM), Home Depot (NYSE: HD), Lowes (NYSE: LOW), Nasdaq: XNFZX, Nasdaq: FSAZX, Avatar Holdings (Nasdaq: AVTR), Apartment Investment & Management (NYSE: AIV), Equity Residential (NYSE: EQR), Avalonbay Communities (NYSE: AVB), UDR Inc. (NYSE: UDR), Essex Property Trust (NYSE: ESS), Camden Property Trust (NYSE: CPT), Senior Housing Properties (NYSE: SNH), BRE Properties (NYSE: BRE), Home Properties (NYSE: HME), Mid-America Apartment (NYSE: MAA), Equity Lifestyle Properties (NYSE: ELS), American Campus Communities (NYSE: ACC), Colonial Properties (NYSE: CLP), American Capital Agency (Nasdaq: AGNC), Sun Communities (NYSE: SUI), Associated Estates (NYSE: AEC), PennyMac Mortgage (NYSE: PMT), Two Harbors (AMEX: TWO), Simon Property Group (NYSE: SPG).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Crack Expands in Housing Sector

The week’s data flow produced another crack in the foundation of the Real Estate sector and pounded housing stocks as well. After raising the volume on my bear call for housing over recent weeks, I suppose all I can say today is...

I told you so!!!

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Housing Rally Failing

Construction Spending was reported Monday for the month of February, and the shares of homebuilders suffered a shock as a result. Total Construction Spending declined 1.1% in February, stunning economists who had forecast an increase of 0.7% at the consensus. When economic data misses significantly against the economists’ view, we see impact to stocks, whose valuation estimates are often influenced by the macro view at Wall Street firms, and are driven by relative sector strategy and industry favoritism as a result.

The shares of homebuilders took a sledge hammer to their bearing walls on the news, with the SPDR S&P Homebuilders (NYSE: XHB) off 0.75% on a day when the SPDR S&P 500 (NYSE: SPY) rose 0.73%. The XHB’s beta based on three years of data is listed as 0.99 by Yahoo Finance; that’s pretty much a 1.0, and yet the security moved in the polar opposite direction of the broader market Monday. Obviously, that was due to the industry specific information, which was outweighed in the broader market by the much more currently relevant global manufacturing data that reached the wire Monday. I say “more currently relevant” because of the severe shrinkage of the housing market over recent years and the numbed expectations for it within the stock market.

Homebuilder shares were broadly lower, with industry players Toll Brothers (NYSE: TOL), D.R. Horton (NYSE: DHI), K.B. Home (NYSE: KBH), PulteGroup (NYSE: PHM), MDC Holdings (NYSE: MDC) and Lennar (NYSE: LEN) all lower on the day. Several are lower again today, like Hovnanian (NYSE: HOV) and Beazer (NYSE: BZH).

More than the general drop in construction spending, which was affected by a 1.6% decrease in non-residential construction, the housing industry took a blow due to a 1.5% decline in new single family home construction. Multi-family projects fared well again, but a renter nation is not indicative of a healthy economy. Multi-family construction rose a full two percentage points in February, continuing its drive of overall residential construction activity.

In conclusion, I offer again one important caveat that is important for the larger publicly traded homebuilders in strong enough capital position to capitalize. The overall weakness of the housing industry has offered many of these firms a great opportunity to take market share. I expect that this is the key reason some have reported solid business results through a generally soft industry environment. I also believe this should support the shares of relative companies, especially once recovery is detected in earnest.

That said, I also believe the market does not perfectly understand this industry critical fact, and so housing stocks will be punished without discretion as the economic deterioration I expect unfolds. In the end, I believe all of such discounting will prove warranted, as the economic scenario I see as most likely is dire, and not one not generally forecast by economists. I have offered tidbits of information regarding this view in articles, but it is not specifically relative to this report. So, I will have more to say about it in the future within a detailed forecast for the economy.

Editor's Note: Article should interest investors in Investors Title (Nasdaq: ITIC), Bank of America (NYSE: BAC), Freddie Mac (OTC: FMCC.OB), Fannie Mae (OTC: FNMA.OB), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), UltraShort Real Estate ProShares (NYSE: SRS), Ultra Real Estate ProShares (NYSE: URE), ING Clarion Global Real Estate Income Fund (NYSE: IGR), Xinyuan Real Estate Co. (NYSE: XIN), Rydex Real Estate Fund H (Nasdaq: RYHRX), T. Rowe Price Real Estate Fund (Nasdaq: TRREX), Toll Brothers (NYSE: TOL), Hovnanian (NYSE: HOV), D.R. Horton (NYSE: DHI), Beazer Homes (NYSE: BZH), Lennar (NYSE: LEN), K.B. Homes (NYSE: KBH), Pulte Homes (NYSE: PHM), NVR Inc. (NYSE: NVR), Gafisa SA (NYSE: GFA), MDC Holdings (NYSE: MDC), Ryland Group (NYSE: RYL), Meritage Homes (NYSE: MTH), Brookfield Homes (NYSE: BHS), Standard Pacific (NYSE: SPF), M/I Homes (NYSE: MHO), Orleans Homebuilders (AMEX: OHB), Vanguard REIT Index ETF (NYSE: VNQ), PNC Bank (NYSE: PNC), J.P. Morgan Chase (NYSE: JPM), Hooker Furniture (Nasdaq: HOFT), Ethan Allen (NYSE: ETH), Pier 1 Imports (NYSE: PIR), Williams Sonoma (NYSE: WSM), Home Depot (NYSE: HD), Lowes (NYSE: LOW), Nasdaq: XNFZX, Nasdaq: FSAZX, Avatar Holdings (Nasdaq: AVTR), Apartment Investment & Management (NYSE: AIV), Equity Residential (NYSE: EQR), Avalonbay Communities (NYSE: AVB), UDR Inc. (NYSE: UDR), Essex Property Trust (NYSE: ESS), Camden Property Trust (NYSE: CPT), Senior Housing Properties (NYSE: SNH), BRE Properties (NYSE: BRE), Home Properties (NYSE: HME), Mid-America Apartment (NYSE: MAA), Equity Lifestyle Properties (NYSE: ELS), American Campus Communities (NYSE: ACC), Colonial Properties (NYSE: CLP), American Capital Agency (Nasdaq: AGNC), Sun Communities (NYSE: SUI), Associated Estates (NYSE: AEC), PennyMac Mortgage (NYSE: PMT), Two Harbors (AMEX: TWO), Simon Property Group (NYSE: SPG).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Appraising the Real Estate Market

After a week’s worth of new data, the market is finally reassessing real estate. Up until now, and excluding my own steadfast voice uttering disagreement, the great majority of real estate market enthusiasts and housing longs have been declaring that this would be the year for recovery. The chart of the SPDR Series Trust SPDR Homebuilders (NYSE: XHB), which represents a pool of homebuilder stocks, concurs, rising 70% from its October 3, 2011 trough through the March 23, 2012 close (adjusted for splits and dividends).

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative tickers: Nasdaq: ITIC, NYSE: BAC, OTC: FMCC.OB, OTC: FNMA.OB, NYSE: GS, NYSE: MS, NYSE: WFC, NYSE: TD, NYSE: SRS, NYSE: URE, NYSE: IGR, NYSE: XIN, Nasdaq: RYHRX, Nasdaq: TRREX, NYSE: TOL, NYSE: HOV, NYSE: DHI, NYSE: BZH, NYSE: LEN, NYSE: KBH, NYSE: PHM, NYSE: NVR, NYSE: GFA, NYSE: MDC, NYSE: RYL, NYSE: MTH, NYSE: BHS, NYSE: SPF, NYSE: MHO, AMEX: OHB, NYSE: VNQ, NYSE: PNC, NYSE: JPM, Nasdaq: HOFT, NYSE: ETH, NYSE: PIR, NYSE: WSM, NYSE: HD, NYSE: LOW, AMEX: VAZ, AMEX: NKR, AMEX: MZA, AMEX: NXE, AMEX: NFZ, Nasdaq: XNFZX, Nasdaq: FSAZX, Nasdaq: AVTR, NYSE: AIV, NYSE: EQR, NYSE: AVB, NYSE: UDR, NYSE: ESS, NYSE: CPT, NYSE: SNH, NYSE: BRE, NYSE: HME, NYSE: MAA, NYSE: ELS, NYSE: ACC, NYSE: CLP, Nasdaq: AGNC, NYSE: SUI, NYSE: AEC, NYSE: PMT and AMEX: TWO, NYSE: SPG.

Real Estate

They said this spring selling season would be the one to spur a real estate recovery; they were wrong. On Friday, New Home Sales were reported running at a slower pace in February than they did in January. The U.S. Department of Housing and Urban Development (HUD) reported that the annual pace of new home sales slipped to a seasonally adjusted rate of 313K. That was short of economists’ expectations, which were set at 325K based on Bloomberg’s survey. It was also under January’s revised lower rate of 318K, cut from the 321K pace initially reported. Most importantly, it shows no sign of new life in new housing.

Just two days earlier, Existing Home Sales, or the sales of used homes, also hit the skids. The National Association of Realtors (NAR) reported that Existing Home Sales fell to an annual pace of 4.59 million in February, down from the revised January rate of 4.63 million. Sure, the decline was modest, and the reported month was within winter (not spring), but several other reports seem to show an unenthused real estate environment.

Housing Starts were reported for the month of February last week as well. I like to look at single-family starts, because the overall number includes multi-family projects, and I believe a renter nation is not a healthy nation. HUD reported that starts of new single-family homes fell to a rate of 457K in February; that’s 9.9% under the revised January figure of 507K. Maybe it’s just me, but such a significant decline doesn’t seem like good news to these weary eyes. Now, the eternal optimists who are long housing or work in the industry will again note the month in question and the fact that the pace of Building Permits for single-family projects improved 4.9%, to 472K in February.

If you are still unsure about where housing is trending, you might study the survey of the homebuilders themselves, which was also reported last week. The National Association of Home Builders (NAHB) reported that its Housing Market Index, which measures the mood of builders, was unchanged in March, leaving it in depressed territory. The NAHB/Wells Fargo Housing Market Index (HMI) stuck at a mark of 28, after February was revised down a point. The index also proved deflating to economists, who after buying into the idea of sector recovery, set their consensus view up at 30 for the month. I should also remind the reader, that 50 delineates between a positive and negative mood. At the current level, builders remain mostly deeply depressed.

If you still need convincing, take a gander at the latest FHFA House Price Index, which in an improving environment, should be expected to reflect price increases. Rather, the report for January showed no change month-to-month, and a 0.8% decrease in prices for the trailing twelve months against the prior year comparable. Adding insult to injury, the December level was adjusted lower, providing an easier bar to hurdle in January.

The stocks of home builders reflected the environment more accurately last week than they had through the capital flow driven run since October of last year. The XHB was down 1.3% on the week, but the shares of some builders saw more severe damage. K.B. Home (NYSE: KBH) was down 8.5% Friday alone and was off 19% on the week after reporting disappointing data. Even industry stalwart Toll Brothers (NYSE: TOL) shed 4.5% last week. It seems the market is finally paying attention to data and economic developments, and heeding my long ignored warnings.

Editor's Note: Article should interest investors in Investors Title (Nasdaq: ITIC), Bank of America (NYSE: BAC), Freddie Mac (OTC: FMCC.OB), Fannie Mae (OTC: FNMA.OB), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), UltraShort Real Estate ProShares (NYSE: SRS), Ultra Real Estate ProShares (NYSE: URE), ING Clarion Global Real Estate Income Fund (NYSE: IGR), Xinyuan Real Estate Co. (NYSE: XIN), Rydex Real Estate Fund H (Nasdaq: RYHRX), T. Rowe Price Real Estate Fund (Nasdaq: TRREX), Toll Brothers (NYSE: TOL), Hovnanian (NYSE: HOV), D.R. Horton (NYSE: DHI), Beazer Homes (NYSE: BZH), Lennar (NYSE: LEN), K.B. Homes (NYSE: KBH), Pulte Homes (NYSE: PHM), NVR Inc. (NYSE: NVR), Gafisa SA (NYSE: GFA), MDC Holdings (NYSE: MDC), Ryland Group (NYSE: RYL), Meritage Homes (NYSE: MTH), Brookfield Homes (NYSE: BHS), Standard Pacific (NYSE: SPF), M/I Homes (NYSE: MHO), Orleans Homebuilders (AMEX: OHB), Vanguard REIT Index ETF (NYSE: VNQ), PNC Bank (NYSE: PNC), J.P. Morgan Chase (NYSE: JPM), Hooker Furniture (Nasdaq: HOFT), Ethan Allen (NYSE: ETH), Pier 1 Imports (NYSE: PIR), Williams Sonoma (NYSE: WSM), Home Depot (NYSE: HD), Lowes (NYSE: LOW), Nasdaq: XNFZX, Nasdaq: FSAZX, Avatar Holdings (Nasdaq: AVTR), Apartment Investment & Management (NYSE: AIV), Equity Residential (NYSE: EQR), Avalonbay Communities (NYSE: AVB), UDR Inc. (NYSE: UDR), Essex Property Trust (NYSE: ESS), Camden Property Trust (NYSE: CPT), Senior Housing Properties (NYSE: SNH), BRE Properties (NYSE: BRE), Home Properties (NYSE: HME), Mid-America Apartment (NYSE: MAA), Equity Lifestyle Properties (NYSE: ELS), American Campus Communities (NYSE: ACC), Colonial Properties (NYSE: CLP), American Capital Agency (Nasdaq: AGNC), Sun Communities (NYSE: SUI), Associated Estates (NYSE: AEC), PennyMac Mortgage (NYSE: PMT), Two Harbors (AMEX: TWO), Simon Property Group (NYSE: SPG).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Support Disintegrates for Housing Stocks

Last week, we authored an article attributing the weekly decline in mortgage activity to the Super Bowl, and the tendency of Americans to celebrate the day like a holiday. We argued that, as with many three-day weekends, this would leave inadequate adjustment to business activity around the day. However, mortgage activity dropped again last week, for the period through February 17. Since the period fell between the Super Bowl and President’s Day, something more than anomaly is leading mortgage activity lower. This report, in fact, offers more evidence of the stall I’ve been warning about for housing, and so the hopeful support tenuously holding up the industry’s shares is now disintegrating rapidly.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Housing Stocks Follow Our Lead Lower

The Mortgage Bankers Association’s Market Composite Index fell 4.5% in the week ending February 17. This week, the main driver of the dip in mortgage activity was a drop in refinancing, with the Refinance Index down 4.8%. There was some creep higher in mortgage rates, but not across the spectrum of mortgage loan sizes and types. I also do not see the creep in rates as enough to stymie activity. The effective rates on jumbo and conforming 30-year mortgages both edged slightly higher, while effective rates for 15-year mortgages and 5/1 ARMS also inched upward. Only 30-year FHA sponsored loans saw effective rate decrease, but the change was also insignificant.

The previous week’s driver of decline was a notable decline in the Purchase Index, or loans tied to the acquisition of properties. We were looking for a like, though opposing rise this week, as the period matched against the Super Bowl inclusive week. Yet, the Purchase Index fell again, this time by 2.9% on a seasonally adjusted basis. Before adjustment, the Purchase Index did improve, but only by 1.4% against the prior week. The gain fell short of making up for the 7.6% decline the week before, so we have to take note. That’s because other data has continued to warn of a stall in housing, which we covered in detail in our recent study of the sector.

Indeed, the latest data reported today seems to confirm that concern. The four-week moving average of the MBA’s Market Composite Index, which would weed out anomalous factors, is down 0.3%. The moving average for the Purchase Index is off a greater 3.21%. The latest data, also reported Wednesday morning, showed Existing Home Sales running at a drag of an annual pace of 4.57 million in January. The rate was up from December, but only after December’s revision dramatically lower, to 4.38 million (from 4.61 million). January’s pace was also short of the consensus view of economists, which was set at 4.69 million according to Bloomberg.

Toll Brothers (NYSE: TOL) missed expectations this week, contributing to a second guessing of homebuilder shares finally. We suggested investors sell short homebuilder shares earlier this year, and have been questioning the strength of a housing recovery based on macroeconomic developments that should stall global economic growth.

The SPDR Series Trust Homebuilders ETF (NYSE: XHB) is off about a percentage point at the hour of scribbling here, and looks to be ready to follow the path I’ve laid out for it now. Individual homebuilders are giving back greater ground, especially those which are in the most precarious of positions. The shares of Hovnanian (NYSE: HOV) and Comstock (Nasdaq: CHCI), two companies I suggested would lead my list lower, are off 0.7% and 3.6%, respectively. K.B. Home (NYSE: KBH), PulteGroup (NYSE: PHM) and D.R. Horton (NYSE: DHI) are off between 1% and 4%. It seems that investors are now agreeing with my argument against the industry, and so support should disappear swiftly for these stocks near-term. I would continue to sell the industry’s shares as their nascent recovery is undermined by fundamental macro-driven drivers.

Article should interest investors in Savings & Loan stocks including Alaska Pacific Bankshares (OTC: AKPB.OB), Allied First Bancorp (OTC: AFBA.OB), Astoria Financial (NYSE: AF), AMB Financial (OTC: AMFC.OB), Ameriana Bancorp (NasdaqCM: ASBI), Anchor Bancorp Wisconsin (Nasdaq: ABCW), Bancorp of New Jersey (AMEX: BKJ), Bank Mutual (Nasdaq: BKMU), BankAtlantic (NYSE: BBX), BankFinancial (Nasdaq: BFIN), Banner (Nasdaq: BANR), BCSB Bancorp (Nasdaq: BCSB), Beacon Federal (Nasdaq: BFED), Berkshire Hills (Nasdaq: BHLB), Blackhawk Bancorp (OTC: BHWB.OB), Blue River Bancshares (OTC: BRBI.OB), Bofi (Nasdaq: BOFI), Broadway Financial (Nasdaq: BYFC), Brookline (Nasdaq: BRKL), Brooklyn Federal (Nasdaq: BFSB), Camco Financial (Nasdaq: CAFI), Capitol Federal (Nasdaq: CFFN), Carver (Nasdaq: CARV), Cecil Bancorp (OTC: CECB.OB), Center Financial (Nasdaq: CLFC), Central Federal (Nasdaq: CFBK), Chicopee (Nasdaq: CBNK), Citizens South (Nasdaq: CSBC), CKF Bancorp (OTC: CKFB.OB), Clarkston Financial (OTC: CKFC.OB), Clifton Savings (Nasdaq: CSBK), Close Brothers (OTC: CBGPY.PK), Columbia Banking (Nasdaq: COLB), Consumers (OTC: CBKM.OB), Dime Community (Nasdaq: DCOM), Enterprise (Nasdaq: EBTC), ESB Financial (Nasdaq: ESBF), ESSA Bancorp (Nasdaq: ESSA), Eureka Financial (OTC: EKFC.OB), FedFirst Fin’l (Nasdaq: FFCO), FFD Fin’l (Nasdaq: FFDF), FFW (OTC: FFWC.OB), First Bancorp of Indiana (OTC: FBPI.OB), First Bancshares (Nasdaq: FBSI), First Capital (Nasdaq: FCAP), First Clover Leaf (Nasdaq: FCLF), First Defiance (Nasdaq: FDEF), First Federal Bancshares of Arkansas (Nasdaq: FFBH), First Financial Holdings (Nasdaq: FFCH), First Independence (OTC: FFSL.OB), First Investors Fin’l Services (OTC: FIFS.PK), First Niagara (Nasdaq: FNFG), First Robinson (OTC: FRFC.OB), First Security Group (Nasdaq: FSGID), First South (Nasdaq: FSBK), Flagstar (NYSE: FBC), Flatbush Federal (OTC: FLTB.OB), Flushing Financial (Nasdaq: FFIC), Greene County (Nasdaq: GCBC), HF Financial (Nasdaq: HFFC), HMN Fin’l (Nasdaq: HMNF), Home Bancorp (Nasdaq: HBCP), Home Federal (Nasdaq: HOME), HopFed (Nasdaq: HFBC), Hudson City (Nasdaq: HCBK), Indiana Community (Nasdaq: INCB), Investors Bancorp (Nasdaq: ISBC), Jacksonville Bancorp (Nasdaq: JXSB), Jefferson Bancshares (Nasdaq: JFBI), Kaiser Federal (Nasdaq: KFFG), Kearny Fin’l (Nasdaq: KRNY), Kentucky First Federal (Nasdaq: KFFB), Lake Shore Bancorp (Nasdaq: LSBK), Louisiana Bancorp (Nasdaq: LABC), LSB Fin’l (Nasdaq: LSBI), Malvern Federal (Nasdaq: MLVF), Meridian Interstate (Nasdaq: EBSB), Meta Fin’l (Nasdaq: CASH), NASB Fin’l (Nasdaq: NASB), Naugatuck Valley (Nasdaq: NVSL), New England Bancshares (Nasdaq: NEBS), New Hampshire Thrift (Nasdaq: NHTB), New York Community (NYSE: NYB), North Central Bancshares (Nasdaq: FFFD), Northeast Community (Nasdaq: NECB), Northwest Bancshares (Nasdaq: NWBI), OceanFirst (Nasdaq: OCFC), Ocwen (NYSE: OCN), Oneida (Nasdaq: ONFC), Park Bancorp (Nasdaq: PFED), Parkvale Fin’l (Nasdaq: PVSA), Pathfinder Bancorp (Nasdaq: PBHC), People’s United (Nasdaq: PBCT), Provident Community (Nasdaq: PCBS), Provident Fin’l (Nasdaq: PROV), Provident Fin’l Services (NYSE: PFS), Provident New York (Nasdaq: PBNY), Prudential Bancorp of PA (Nasdaq: PBIP), PSB Holding (Nasdaq: PSBH), Pulaski Fin’l (Nasdaq: PULB), PVF Capital (Nasdaq: PVFC), QC Holding (Nasdaq: QCCO), River Valley Bancorp (Nasdaq: RIVR), Riverview Bancorp (Nasdaq: RVSB), Roma Fin’l (Nasdaq: ROMA), Salisbury Bancorp (AMEX: SAL), SI Financial (Nasdaq: SIFI), Southern Missouri (Nasdaq: SMBC), Sterling Fin’l (Nasdaq: STSA), Teche Holding (AMEX: TSH), TF Fin’l (Nasdaq: THRD), Timberland Bancorp (Nasdaq: TSBK), United Community (Nasdaq: UCBA), United Community Fin’l (Nasdaq: UCFC), United Fin’l Bancorp (Nasdaq: UBNK), Valley Fin’l (Nasdaq: VYFC), Washington Federal (Nasdaq: WFSL), Waterstone Fin’l (Nasdaq: WSBF), Wayne Savings (Nasdaq: WAYN), WSB Holdings (Nasdaq: WSB) and WVS Financial (Nasdaq: WVFC).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Renter Nation

Housing hounds will likely snarl at my take of the latest Housing Starts data, but the truth must be told. While housing starts gained ground in January, that ground was overwhelmingly taken through the construction of multi-family projects upon it. If the investment community thinks a renter nation is a healthy nation, well then it has been misled.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative Tickers: NYSE: ACC, Nasdaq: AGNC, NYSE: AIV, Nasdaq: AMTG, NYSE: ARR, NYSE: AEC, NYSE: AVB, NYSE: BRE, NYSE: CPT, NYSE: CCG, NYSE: CLP, NYSE: CYS, NYSE: EDR, NYSE: ELS, NYSE: EQR, NYSE: ESS, NYSE: HTS, NYSE: HME, OTC: MRTI.PK, NYSE: MAA, Nasdaq: NYMT, NYSE: PMT, NYSE: PPS, NYSE: SNH, NYSE: SUI, NYSE: TWO and NYSE: UDR.

A Renter Nation

Housing Starts, reported Thursday for the month of January, gained by 1.5% over December and ranked 9.9% above January 2011. However, single-family housing starts, which are typically seen as the key measure of housing health, actually fell 1.0% against December. The growth highlighted by the headlines was all found in multi-family units of 5 or more, where construction increased by 14.4%. A shift towards a renter nation is not indicative of a healthy atmosphere by most means. There’s just one driver we view healthy for multi-family growth, and that’s driven by demographics. Our aging nation is aiding the growth of the senior housing industry, as seen in the long-term chart of the Senior Housing Properties Trust (NYSE: SNH).

Still, we suggest that it is precisely the shift in the economic situation of a great many Americans and the shift in the lending environment, which has severely damaged the prospects of home ownership in America. Some of that change is of course for good reason, with no more liar loans issued and “no credit, no problem” guarantees made any longer. Higher scrutiny and regulation of the industry was of course a necessity after the alleged negligence (by several Congressmen at minimum) of the rating agencies. Standard & Poor’s (NYSE: MHP) and Moody’s (NYSE: MCO) regularly rated mortgage backed securities investment grade, due to the diversification provided by investment pools. Unfortunately, they missed the possibility of broad real estate value decline across the nation and also did not account for the bubble blowing, greed driven business that was happening at some financial institutions in the qualification of borrowers.

Bill Clinton’s revival of the American dream of home ownership has hit a serious snag today. Indeed, home ownership is on the decline after peaking in 2004 at 69.2%. It’s been falling over recent years, due to the financial crisis & resultant foreclosures, economic recession & resultant unemployment and the changed financing environment around real estate. In the fourth quarter of 2011, home ownership was measured at 66.0%, and that was down from Q3’s 66.3%.

Given the latest trend reported in the Housing Starts data over recent months, it appears home ownership will deteriorate further. While the popular press was touting it, and the stock market was celebrating Housing Start growth of 1.5% in January, we were pointing out the 1.0% decline in single-family property starts. While single-family activity is up 16.2% against the low bar set in January of 2011, single-family construction permits are up only 6.2% against the prior year. On the contrary, permits filed for multi-family units are up 61% against the prior year period. Take heed my fellow citizens, because the American dream is at stake.

In the zero sum game where many are suffering, some are getting richer. While the shares of residential real estate REITs had their issues through the crisis, and have traded choppy over the last six months, the last year’s trading has most of the largest players clear in the green. Market Cap leaders Equity Residential (NYSE: EQR) (+11.6%), AvalonBay Communities (NYSE: AVB) (+18.3%), American Capital Agency (Nasdaq: AGNC) (+24%), UDR, Inc. (NYSE: UDR) (+10.9%) and Essex Property Trust (NYSE: ESS) (+27%) are all sharply higher over the trailing twelve month period, adjusted for dividends and splits. The same goes for homebuilders over recent months, though we take issue there. The apartment managers should continue to benefit from America’s shift towards a renter nation. Though, given the ongoing economic issues plaguing our country, we wonder how many of those new renters are up-to-date on their rent. That said, net-net, gains still favors rental property managers.

This article should interest investors in residential REITs like American Campus Communities (NYSE: ACC), American Capital Agency (Nasdaq: AGNC), Apartment Investment and Management (NYSE: AIV), Apollo Residential Mortgage (Nasdaq: AMTG), ARMOUR Residential REIT (NYSE: ARR), Associated Estates Realty (NYSE: AEC), AvalonBay Communities (NYSE: AVB), BRE Properties (NYSE: BRE), Camden Property Trust (NYSE: CPT), Campus Crest Communities (NYSE: CCG), Colonial Properties Trust (NYSE: CLP), CYS Investments (NYSE: CYS), Education Realty Trust (NYSE: EDR), Equity LifeStyle Properties (NYSE: ELS), Equity Residential (NYSE: EQR), Essex Property Trust (NYSE: ESS), Hatteras Financial (NYSE: HTS), Home Properties (NYSE: HME), Maxus Realty Trust (OTC: MRTI.PK), Mid-America Apartment Communities (NYSE: MAA), New York Mortgage Trust (Nasdaq: NYMT), PennyMac Mortgage Investment Trust (NYSE: PMT), Post Properties (NYSE: PPS), Senior Housing Properties Trust (NYSE: SNH), Sun Communities (NYSE: SUI), Two Harbors Investment (NYSE: TWO) and UDR (NYSE: UDR).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Homebuilder Shares and Housing Review

The general view of housing is decidedly positive heading into the 2012 spring selling season… as usual. It is positive compared to other recent spring selling seasons as well, but not by much, given the generally speculative hoping that occurs among industry participants around this time of year. The mood among homebuilders is also improved, though notably depressed still on an absolute basis. That is because the industry metric measures the small, under-capitalized, poorly performing construction outfits alongside the large, well-capitalized, publicly traded industry leaders. Still, many publicly traded, large builders like D.R. Horton (NYSE: DHI) and K.B. Home (NYSE: KBH) have been posting increases in orders of varying degrees over a low set bar, though cancellations persist. These factors, helped by capital flow drivers (tax driven mostly), have many stock market players quite frenzied, with homebuilders’ shares among market leaders. The SPDR Series Trust Homebuilders ETF (NYSE: XHB) is up roughly 62% since the industry trough on October 3, 2011, adjusted for dividends and splits. The ETF is up roughly 18% year-to-date, separating itself clearly from the approximate 7.4% increase in the S&P 500 Index. My review here is to take stock of what has given the industry lift to date, and to survey its footing for the months ahead.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative tickers: Nasdaq: ITIC, NYSE: BAC, OTC: FMCC.OB, OTC: FNMA.OB, NYSE: GS, NYSE: MS, NYSE: WFC, NYSE: TD, NYSE: SRS, NYSE: URE, NYSE: IGR, NYSE: XIN, Nasdaq: RYHRX, Nasdaq: TRREX, NYSE: TOL, NYSE: HOV, NYSE: DHI, NYSE: BZH, NYSE: LEN, NYSE: KBH, NYSE: PHM, NYSE: NVR, NYSE: GFA, NYSE: MDC, NYSE: RYL, NYSE: MTH, NYSE: BHS, NYSE: SPF, NYSE: MHO, AMEX: OHB, NYSE: VNQ, NYSE: PNC, NYSE: JPM, Nasdaq: HOFT, NYSE: ETH, NYSE: PIR, NYSE: WSM, NYSE: HD, NYSE: LOW, AMEX: VAZ, AMEX: NKR, AMEX: MZA, AMEX: NXE, AMEX: NFZ, Nasdaq: XNFZX, Nasdaq: FSAZX, Nasdaq: AVTR, NYSE: AIV, NYSE: EQR, NYSE: AVB, NYSE: UDR, NYSE: ESS, NYSE: CPT, NYSE: SNH, NYSE: BRE, NYSE: HME, NYSE: MAA, NYSE: ELS, NYSE: ACC, NYSE: CLP, Nasdaq: AGNC, NYSE: SUI, NYSE: AEC, NYSE: PMT and AMEX: TWO, NYSE: SPG.

Housing Review

New aggregate industry data has been reaching the wire this week, and it seems to conquer in its message with that of recent weeks. The argument the data makes is clear, and definitely contrary to the performance of homebuilder shares (if you read beyond the headlines), which I argue have benefited as much from unsustainable capital flow drivers as from fundamental improvement in the housing industry. Furthermore, the macroeconomic outlook remains grim and the trend seems to show deterioration. So, I once again argue that sooner or later, at least a portion of homebuilder valuations built largely upon capital flow logic and prospective hope is likely to give way before propelling much further on momentum. I see speculative interests which may view themselves as wise contrarians at risk by result. But this logic extends beyond just homebuilders, to all cyclically sensitive shares that have moved in kind.

Data Review

Homebuilder confidence was touted Wednesday as yet another rally cry for the industry’s shares. The National Association of Home Builders (NAHB) reported the fifth consecutive month of improvement in its Housing Market Index. But while the HMI was climbing to a mark of 29, from 25 in January, it was still sitting deeply under the mark that delineates positive outlook from negative. In fact, while the HMI may be off suicide watch, it remains in a sad, sad state.

Looking at Wednesday’s weekly mortgage application data, I found nothing worth celebrating. The Mortgage Bankers Association’s Market Composite Index only fell by 1.0% in the week ending February 10, 2012 when compared against the preceding week. Refinance activity was up 0.8% for that relative period, but the mortgage applications tied to the purchase of a home fell 8.4%. Believe it or not, though, the weekly decline was probably the result of the Super Bowl, which fell on February 5. More importantly, the Purchase Index was 7.6% short of the mark it set during the same week last year. That comparison is clearly inconsistent with the profits accumulating in the shares of homebuilders in aggregate.

Housing Starts, reported Thursday for the month of January, gained by 1.5% over December and ranked 9.9% above January 2011. Even here, yours truly found reason to argue. You see, single-family housing starts actually fell 1.0% against December. The growth was found in multi-family units of 5 or more, where construction increased by 14.4%. A shift towards a renter nation is not indicative of a healthy atmosphere, though demographics are aiding the growth of the senior housing industry, as seen in the long-term chart of the Senior Housing Properties Trust (NYSE: SNH).

Looking back two weeks at the latest home price data, the Standard & Poor’s Case Shiller Home Price Index showed acceleration of home price decline in November. The data was downright depressing, with 19 of 20 cities experiencing a second consecutive month of price contraction. However, many builders like Lennar (NYSE: LEN) are showing sales price increases alongside volume gains, thanks to differentiation and buyer focus between the lean new home and flooded existing home markets. This is a second fundamental point which is positive for publicly traded builders, and I will not overlook it. It is certainly one tangible reason why homebuilders have attracted capital to date. However, I do not believe it will guard the high beta shares from macroeconomic driven slippage and geopolitical trigger. Perhaps these fundamental factors will contribute to an industry wide beta contraction though, as the industry has strengthened through trial.

A Fundamental Case Exists

Another bit of good news for homebuilders is that their own version of austerity has shaved their inventory and that of the home market, in terms of months to sell through. Furthermore, Realtytrac sees the foreclosure cycle peaked, so the flow of low-priced comparables into the pool of available properties is easing. Still, the industry resource says banks continue to work through their own stock of “delayed foreclosures.” Also, new foreclosures continue to flow only less heavily into the market, given the still difficult labor situation and strained savings of the long-term unemployed.

Better capitalized, large, publicly traded builders are also benefiting from market share gains helped along by the demise of a good number of smaller builders that found themselves over-levered with nowhere to sell at the bust of the bubble. These changes to the composition of the new home construction pie are likely contributing to the the order growth and other gains reported by the likes of Beazer Homes (NYSE: BZH), Toll Brothers (NYSE: TOL) and others. This is a fundamental reason to like home builders over the long run.

Another contributor to growth for the public builders is the low base which today’s activity is rising from. That fact comes through in the cautionary commentary of the executives within the reports referred to herein. The prospect for industry revival through its contraction and given the signs of survival in many of the healthier builders has the most prospective of the bunch gaining more ground, like that seen at Hovnanian (NYSE: HOV) and Comstock (Nasdaq: CHCI). These are the first places I would look to lessen risk, if not outright position short.

In Conclusion

Industry structural change factor aside, I believe these stocks (and other cyclically sensitive sectors like retail stores – which I recently suggested investors short) are going to need ongoing support from the economy to keep capital support. I just see that failing them given signs of new U.S. economic sluggishness, stubborn unemployment on labor market structure issues, European recession and an Iran event likelihood that can no longer be dismissed. The vulnerability of the U.S. economy to costly energy (rising gasoline prices), disruptive geopolitical disorder and significant export softness, given still too high under-employment and too low consumer confidence and business investment leaves cyclical industries in tenuous state.

The chart of the XHB says to me that the latest run up for homebuilders is at a point of reassessment. While the individual corporate reports of the healthiest publicly traded companies should continue to offer general support, many names will disappoint high hopes. Furthermore, the operational results bar has been raised now for these stocks, which increases the likelihood of their falling short of expectations. Given the aforementioned macro weights, cyclical shares should give way. Highest on the hill among those are the recently raised homebuilder stocks, and so I reiterate my call to sell the shares despite the evident driver of structural industry improvement.

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Editor's Note: Article should interest investors in Investors Title (Nasdaq: ITIC), Bank of America (NYSE: BAC), Freddie Mac (OTC: FMCC.OB), Fannie Mae (OTC: FNMA.OB), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), UltraShort Real Estate ProShares (NYSE: SRS), Ultra Real Estate ProShares (NYSE: URE), ING Clarion Global Real Estate Income Fund (NYSE: IGR), Xinyuan Real Estate Co. (NYSE: XIN), Rydex Real Estate Fund H (Nasdaq: RYHRX), T. Rowe Price Real Estate Fund (Nasdaq: TRREX), Toll Brothers (NYSE: TOL), Hovnanian (NYSE: HOV), D.R. Horton (NYSE: DHI), Beazer Homes (NYSE: BZH), Lennar (NYSE: LEN), K.B. Homes (NYSE: KBH), Pulte Homes (NYSE: PHM), NVR Inc. (NYSE: NVR), Gafisa SA (NYSE: GFA), MDC Holdings (NYSE: MDC), Ryland Group (NYSE: RYL), Meritage Homes (NYSE: MTH), Brookfield Homes (NYSE: BHS), Standard Pacific (NYSE: SPF), M/I Homes (NYSE: MHO), Orleans Homebuilders (AMEX: OHB), Vanguard REIT Index ETF (NYSE: VNQ), PNC Bank (NYSE: PNC), J.P. Morgan Chase (NYSE: JPM), Hooker Furniture (Nasdaq: HOFT), Ethan Allen (NYSE: ETH), Pier 1 Imports (NYSE: PIR), Williams Sonoma (NYSE: WSM), Home Depot (NYSE: HD), Lowes (NYSE: LOW), Nasdaq: XNFZX, Nasdaq: FSAZX, Avatar Holdings (Nasdaq: AVTR), Apartment Investment & Management (NYSE: AIV), Equity Residential (NYSE: EQR), Avalonbay Communities (NYSE: AVB), UDR Inc. (NYSE: UDR), Essex Property Trust (NYSE: ESS), Camden Property Trust (NYSE: CPT), Senior Housing Properties (NYSE: SNH), BRE Properties (NYSE: BRE), Home Properties (NYSE: HME), Mid-America Apartment (NYSE: MAA), Equity Lifestyle Properties (NYSE: ELS), American Campus Communities (NYSE: ACC), Colonial Properties (NYSE: CLP), American Capital Agency (Nasdaq: AGNC), Sun Communities (NYSE: SUI), Associated Estates (NYSE: AEC), PennyMac Mortgage (NYSE: PMT), Two Harbors (AMEX: TWO), Simon Property Group (NYSE: SPG).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Noise Still Drowns Out Housing Data

Over the last month or so the weekly mortgage activity data produced by the Mortgage Bankers Association has been choppy to say the least. That is because of the imperfect adjustment for holidays, including Christmas, New Year’s and in this week’s data, Martin Luther King Day. However, moving forward, except for President’s Day on February 20, there should be very little noise in the data, barring wild swings in weather. Therefore, we should be able to get a clearer sense of the trend in housing, and as the weather warms, an early idea about the spring surge some real estate pundits expect.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative tickers: NYSE: AF, NasdaqCM: ASBI, Nasdaq: ABCW, AMEX: BKJ, Nasdaq: BKMU, NYSE: BBX, Nasdaq: BFIN, Nasdaq: BANR, Nasdaq: BCSB, Nasdaq: BFED, Nasdaq: BHLB, Nasdaq: BOFI, Nasdaq: BYFC, Nasdaq: BRKL, Nasdaq: BFSB, Nasdaq: CAFI, Nasdaq: CFFN, Nasdaq: CARV, Nasdaq: CLFC, Nasdaq: CFBK, Nasdaq: CBNK, Nasdaq: CSBC, Nasdaq: CSBK, Nasdaq: COLB, Nasdaq: DCOM, Nasdaq: EBTC, Nasdaq: ESBF, Nasdaq: ESSA, Nasdaq: FFCO, Nasdaq: FFDF, Nasdaq: FBSI, Nasdaq: FCAP, Nasdaq: FCLF, Nasdaq: FDEF, Nasdaq: FFBH, Nasdaq: FFCH, Nasdaq: FNFG, Nasdaq: FSGID, Nasdaq: FSBK, NYSE: FBC, Nasdaq: FFIC, Nasdaq: GCBC, Nasdaq: HFFC, Nasdaq: HMNF, Nasdaq: HBCP, Nasdaq: HOME, Nasdaq: HFBC, Nasdaq: HCBK, Nasdaq: INCB, Nasdaq: ISBC, Nasdaq: JXSB, Nasdaq: JFBI, Nasdaq: KFFG, Nasdaq: KRNY, Nasdaq: KFFB, Nasdaq: LSBK, Nasdaq: LABC, Nasdaq: LSBI, Nasdaq: MLVF, Nasdaq: EBSB, Nasdaq: CASH, Nasdaq: NASB, Nasdaq: NVSL, Nasdaq: NEBS, Nasdaq: NHTB, NYSE: NYB, Nasdaq: FFFD, Nasdaq: NECB, Nasdaq: NWBI, Nasdaq: OCFC, NYSE: OCN, Nasdaq: ONFC, Nasdaq: PFED, Nasdaq: PVSA, Nasdaq: PBHC, Nasdaq: PBCT, Nasdaq: PCBS, Nasdaq: PROV, NYSE: PFS, Nasdaq: PBNY, Nasdaq: PBIP, Nasdaq: PSBH, Nasdaq: PULB, Nasdaq: PVFC, Nasdaq: QCCO, Nasdaq: RIVR, Nasdaq: RVSB, Nasdaq: ROMA, AMEX: SAL, Nasdaq: SIFI, Nasdaq: SMBC, Nasdaq: STSA, AMEX: TSH, Nasdaq: THRD, Nasdaq: TSBK, Nasdaq: UCBA, Nasdaq: UCFC, Nasdaq: UBNK, Nasdaq: VYFC, Nasdaq: WFSL, Nasdaq: WSBF, Nasdaq: WAYN, Nasdaq: WSB and Nasdaq: WVFC.

Noise Drowned Housing & Economic Data

This week’s Weekly Application Survey, covering the week ending January 20, included the Martin Luther King Jr. holiday. It was a bank holiday, and so comes to play in mortgage activity. For the week, the MBA’s Market Composite Index fell by 5% from the week before, handicapped by what we see as inadequate adjustment for the business drop-off that occurs on the Friday before and the Tuesday that follows every three day weekend. I’ve originated this viewpoint and continue to put it forth here.

Purchase Activity, which measures mortgage application activity tied to the purchase of homes, fell by 5.4% from the week just prior. I again attribute this decline to the holiday impact, despite the adjustment by the MBA. On an unadjusted basis, this index fell by 9.7%. However, we still cannot use this data in pure form in our forecasting or investment assumptions, for the reasons aforementioned.

The Refinance Index fell by 5.2%, again on the holiday noise. Mortgage rate direction varied across mortgage categories. For instance, the average contracted rate on 30-year fixed rate mortgages with conforming loan balances (417,500 or less) increased to 4.11% from 4.06% the week before. While the points decreased for 80% loan to value ratios, the effective mortgage rate still rose. As for jumbo loan balances (greater than conforming), the average contracted rate for same term fixed rate mortgages fell slightly to 4.39%, from 4.4%. While points rose here, the effective rate still decreased. FHA sponsored loans saw the average contracted rate on 30-year fixed rate loans rise to 3.97% from 3.91% the week before. Average contracted rates on 15-year fixed rate mortgages rose to 3.4% from 3.33%.

Even the four-week moving average of the Market Composite Index seems to me seasonally skewed as it moves out of the holiday inclusive period. For the latest period, this average was up 4.12%, and it should continue higher as it leaves the holiday season behind.

As we move forward, the weekly data faces little distraction, except for what may come from weather and also President’s Day in February. Thus, those of us studying this data point, and others, will get a clearer view to which to base more solid forecasts upon. That said, this benefit will not account for what may lie ahead of us, which I’ve begun talking about in recent columns. In fact, in my latest article, I based a sell call on paper profit rich homebuilders on this view. Today’s mortgage activity data, along with the Pending Home Sales Index decline and FHFA House Price Index’s monthly price increase have the relative shares of Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), J.P. Morgan Chase (NYSE: JPM) and K.B. Home (NYSE: KBH) trading mixed at this hour. K.B. Home was up 2.9% near noontime, while J.P. Morgan and Wells Fargo were lower by about 1%.

Article should interest investors in Savings & Loan stocks including Alaska Pacific Bankshares (OTC: AKPB.OB), Allied First Bancorp (OTC: AFBA.OB), Astoria Financial (NYSE: AF), AMB Financial (OTC: AMFC.OB), Ameriana Bancorp (NasdaqCM: ASBI), Anchor Bancorp Wisconsin (Nasdaq: ABCW), Bancorp of New Jersey (AMEX: BKJ), Bank Mutual (Nasdaq: BKMU), BankAtlantic (NYSE: BBX), BankFinancial (Nasdaq: BFIN), Banner (Nasdaq: BANR), BCSB Bancorp (Nasdaq: BCSB), Beacon Federal (Nasdaq: BFED), Berkshire Hills (Nasdaq: BHLB), Blackhawk Bancorp (OTC: BHWB.OB), Blue River Bancshares (OTC: BRBI.OB), Bofi (Nasdaq: BOFI), Broadway Financial (Nasdaq: BYFC), Brookline (Nasdaq: BRKL), Brooklyn Federal (Nasdaq: BFSB), Camco Financial (Nasdaq: CAFI), Capitol Federal (Nasdaq: CFFN), Carver (Nasdaq: CARV), Cecil Bancorp (OTC: CECB.OB), Center Financial (Nasdaq: CLFC), Central Federal (Nasdaq: CFBK), Chicopee (Nasdaq: CBNK), Citizens South (Nasdaq: CSBC), CKF Bancorp (OTC: CKFB.OB), Clarkston Financial (OTC: CKFC.OB), Clifton Savings (Nasdaq: CSBK), Close Brothers (OTC: CBGPY.PK), Columbia Banking (Nasdaq: COLB), Consumers (OTC: CBKM.OB), Dime Community (Nasdaq: DCOM), Enterprise (Nasdaq: EBTC), ESB Financial (Nasdaq: ESBF), ESSA Bancorp (Nasdaq: ESSA), Eureka Financial (OTC: EKFC.OB), FedFirst Fin’l (Nasdaq: FFCO), FFD Fin’l (Nasdaq: FFDF), FFW (OTC: FFWC.OB), First Bancorp of Indiana (OTC: FBPI.OB), First Bancshares (Nasdaq: FBSI), First Capital (Nasdaq: FCAP), First Clover Leaf (Nasdaq: FCLF), First Defiance (Nasdaq: FDEF), First Federal Bancshares of Arkansas (Nasdaq: FFBH), First Financial Holdings (Nasdaq: FFCH), First Independence (OTC: FFSL.OB), First Investors Fin’l Services (OTC: FIFS.PK), First Niagara (Nasdaq: FNFG), First Robinson (OTC: FRFC.OB), First Security Group (Nasdaq: FSGID), First South (Nasdaq: FSBK), Flagstar (NYSE: FBC), Flatbush Federal (OTC: FLTB.OB), Flushing Financial (Nasdaq: FFIC), Greene County (Nasdaq: GCBC), HF Financial (Nasdaq: HFFC), HMN Fin’l (Nasdaq: HMNF), Home Bancorp (Nasdaq: HBCP), Home Federal (Nasdaq: HOME), HopFed (Nasdaq: HFBC), Hudson City (Nasdaq: HCBK), Indiana Community (Nasdaq: INCB), Investors Bancorp (Nasdaq: ISBC), Jacksonville Bancorp (Nasdaq: JXSB), Jefferson Bancshares (Nasdaq: JFBI), Kaiser Federal (Nasdaq: KFFG), Kearny Fin’l (Nasdaq: KRNY), Kentucky First Federal (Nasdaq: KFFB), Lake Shore Bancorp (Nasdaq: LSBK), Louisiana Bancorp (Nasdaq: LABC), LSB Fin’l (Nasdaq: LSBI), Malvern Federal (Nasdaq: MLVF), Meridian Interstate (Nasdaq: EBSB), Meta Fin’l (Nasdaq: CASH), NASB Fin’l (Nasdaq: NASB), Naugatuck Valley (Nasdaq: NVSL), New England Bancshares (Nasdaq: NEBS), New Hampshire Thrift (Nasdaq: NHTB), New York Community (NYSE: NYB), North Central Bancshares (Nasdaq: FFFD), Northeast Community (Nasdaq: NECB), Northwest Bancshares (Nasdaq: NWBI), OceanFirst (Nasdaq: OCFC), Ocwen (NYSE: OCN), Oneida (Nasdaq: ONFC), Park Bancorp (Nasdaq: PFED), Parkvale Fin’l (Nasdaq: PVSA), Pathfinder Bancorp (Nasdaq: PBHC), People’s United (Nasdaq: PBCT), Provident Community (Nasdaq: PCBS), Provident Fin’l (Nasdaq: PROV), Provident Fin’l Services (NYSE: PFS), Provident New York (Nasdaq: PBNY), Prudential Bancorp of PA (Nasdaq: PBIP), PSB Holding (Nasdaq: PSBH), Pulaski Fin’l (Nasdaq: PULB), PVF Capital (Nasdaq: PVFC), QC Holding (Nasdaq: QCCO), River Valley Bancorp (Nasdaq: RIVR), Riverview Bancorp (Nasdaq: RVSB), Roma Fin’l (Nasdaq: ROMA), Salisbury Bancorp (AMEX: SAL), SI Financial (Nasdaq: SIFI), Southern Missouri (Nasdaq: SMBC), Sterling Fin’l (Nasdaq: STSA), Teche Holding (AMEX: TSH), TF Fin’l (Nasdaq: THRD), Timberland Bancorp (Nasdaq: TSBK), United Community (Nasdaq: UCBA), United Community Fin’l (Nasdaq: UCFC), United Fin’l Bancorp (Nasdaq: UBNK), Valley Fin’l (Nasdaq: VYFC), Washington Federal (Nasdaq: WFSL), Waterstone Fin’l (Nasdaq: WSBF), Wayne Savings (Nasdaq: WAYN), WSB Holdings (Nasdaq: WSB) and WVS Financial (Nasdaq: WVFC).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.