Housing Market in Recovery

What a week! It has been chock-full of housing data, with homebuilder sentiment, mortgage activity, existing home sales and housing starts all reaching the wire. Judging by the movement of housing stocks, we could confidently say the message conveyed was generally positive. The SPDR S&P Homebuilders (NYSE: XHB) gained 1.8% Wednesday after the two most key reports were published.

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 Market Recovery

Looking at one of those, we discussed the Housing Starts data in detail in a report published on Wednesday. The government report offered mildly positive news for the housing industry, with Starts up 2.3% in August, but that growth was short of economists’ expectations. Also, looking forward, permits authorized for future housing starts declined by 1% in August, but met the economists’ consensus and were still 24.5% above the prior year level of activity. The shares of builders gained on the news and on the other data released Wednesday.

Homebuilder	Wednesday’s Change
Ryland Group (NYSE: RYL)	+5.7%
M.D.C. Holdings (NYSE: MDC)	+2.4%
NVR (NYSE: NVR)	+1.1%
Hovnanian (NYSE: HOV)	+1.6%
Lennar (NYSE: LEN)	+1.9%
Beazer (NYSE: BZH)	+6.2%
Meritage (NYSE: MTH)	+2.5%

Existing Home Sales data were the real catalyst for stocks Wednesday, driving even the SPDR S&P 500 (NYSE: SPY) higher, before it gave back ground in the last several minutes of trading. Sales of existing homes jumped 7.8% in August to their best pace in two years and well ahead of economists’ expectations. Growth was indiscriminate, reaching higher by nearly equal degree across the geographical markets of the Northeast, Midwest, South and West. The report signaled that the health of the real estate market had improved substantially. The median price of a home nationally was up 9.5% against the prior year, and marked solid month-to-month increase as well. Inventory was down, as was the percentage of distressed sales to the total. The news was so enthusing that it lifted stocks across the real estate sector, including mortgage lenders, title insurance providers, mortgage insurance providers and peripheral suppliers of construction materials.

Company	Wednesday’s Change
Bank of America (NYSE: BAC)	+0.7%
Citigroup (NYSE: C)	+0.7%
PNC Financial (NYSE: PNC)	+0.7%
SunTrust Banks (NYSE: STI)	+1.2%
PHH Corp. (NYSE: PHH)	+2.6%
MGIC Investment (NYSE: MTG)	+1.9%
Radian Group (NYSE: RDN)	+6.4%
Home Depot (NYSE: HD)	+1.0%
Lowes (NYSE: LOW)	+1.4%
USG (NYSE: USG)	+1.7%

The latest Weekly Applications Survey was published by the Mortgage Bankers Association (MBA) Wednesday morning as well. It showed mortgage activity held about steady in the week ending September 14. The real good news was found in its measurement of mortgage rates, which mostly declined in the period. The Existing Home Sales Report had shown a slight increase in average contracted mortgage rates in August. However, the latest quantitative easing program by the Federal Reserve is expected by most to lower rates even further.

It would be a little premature to expect to find any impact from the Fed announcement or mortgage backed securities purchases in this week’s data, but coming weeks could be affected. Still, rates on 15-year fixed rate mortgages reached a historic low in the latest period, dropping to 3.03%, and the average rate for FHA sponsored 30-year fixed rate mortgages held at its historical low of 3.5%.

On Tuesday, the National Association of Home Builders (NAHB) reported its Housing Market Index (HMI). The HMI is a measure of homebuilder sentiment, and has been deeply underwater for quite some time now. A mark under 50.0 for the HMI signifies that more builders view the state of homebuilding negatively than positively.

For the fifth straight month, the HMI improved, this time by three points to a mark of 40. It does not seem like good news, considering the index remains 10 points short of breakeven, but consider that it has not been this high since June of 2006. The best of the good news is that sentiment is improving across measured factors. The component index measuring current sales conditions improved four points to 42; the component measuring expectations for the next six months improved by eight points to 51; and finally, the component measuring the traffic of prospective buyers increased by a point to 31. Regionally speaking, the Midwest and West led with five point gains to 40 and 43, respectively. The South recorded a four point gain to 36, and the Northeast took back two points to 30.

So there you have it, four data points illustrating an improving real estate sector. It’s quite ironic that the real estate sector is improving just as the economy seems to be deteriorating, as traditionally, real estate has been a key catalyst of economic growth. It may just be that because of the structural changes of homeownership, with mortgage loans harder to qualify for, and given the still underemployment burdened economy, real estate doesn’t have the power to drive us higher by itself currently. Also, what has been a catalyst for growth of our economy more recently, the global marketplace, is currently dysfunctional and burdensome, at least in part. The usual intangibles, like geopolitical threats, are as scary as they ever were. Because of these issues, the vulnerability of our economy, and the cyclical nature of real estate, I remain concerned that this nascent housing strength could be quickly undermined.

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 Activity Misleads

The Mortgage Bankers Association (MBA) reported its Market Composite Index jumped 11.1% in the week ending September 7. However, the Labor Day weekend inclusive result contains risk of adjustment error. Thus, real estate enthusiasts would be wise to avoid reading too much into the latest result. This is well illustrated by the 12% decrease in the index when left unadjusted.

According to the MBA, the seasonally adjusted Purchase Index, which measures mortgage applications for home purchases, increased 8% week-to-week. However, the unadjusted version fell by more than 15%. Housing stocks are on fire, but it’s most likely due to the European crisis alleviation and anticipation of Federal Reserve help Thursday.

Company & Ticker	Change at 2:15 PM
SPDR S&P Homebuilders (NYSE: XHB)	+1.6%
PulteGroup (NYSE: PHM)	+7.0%
Toll Brothers (NYSE: TOL)	+3.6%

Mortgage rates eased in the period, after a recent stalling of a declining trend, perhaps leading those who had been waiting for another basis point to refinance. Mortgage rates on 30-year fixed rate FHA sponsored mortgages fell to a new survey low of 3.5% on average, down from 3.54% the week before. Average contracted rates fell across conforming loan balances, jumbo loan balances, 15-year mortgages and 5/1 ARMS.

The MBA’s Refinance Index, which is adjusted, increased 12% through the period. The MBA speculated that this might have benefited some from online mortgage application filing. As I said before, it also could have been driven by imperfect adjustment, or as implied above, by the drop in mortgage rates. Major mortgage lenders shares are mostly rising today, save Bank of America (BAC), though again more likely on the broader macroeconomic driver than on this data. Bank of America had started higher like the rest of the group, but I’m speculating it moved lower after a story was published indicating a change in management and possibly strategy was imminent.

Company & Ticker	Change at 2:15 PM
Bank of America (NYSE: BAC)	-1.4%
Wells Fargo (NYSE: WFC)	+0.5%
Citigroup (NYSE: C)	+1.0%
J.P. Morgan Chase (NYSE: JPM)	+0.9%

Real estate enthusiasts will probably be well served by approaching the market cautiously. While Fed action might further help mortgage rates, those gains would likely be on a diminishing scale. That’s because the issue for most American home shoppers is not rates. Rather, Americans are contending with higher scrutiny in qualifying for loans and other crisis created and economic related problems.

Moving forward, while the publicly traded builders continue to benefit from industry dynamics, global macroeconomic and other concerns still pose serious threat to undermine the chances of a robust and broad real estate recovery. That said, I see prices rising against an eventually weakening dollar, and view the current period right for home purchase. As for the publicly traded homebuilders, in the individual cases where market share gains and the benefits from multi-family construction continue to support operating results, the stocks might keep support until the midnight hour, unlike most other cyclical stocks.

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.

Home Prices Improved but Case & Shiller Agree with Me

The Standard & Poor’s Case Shiller Home Price Index was reported improved in June by most measures of comparison. Yet, the index’s founders Professors Case and Shiller, expressed concern about the outlook for housing in a Bloomberg Radio interview this morning. The two wise men might add a mouthy blogger to their troop, as I’ve been doing much of the same over the course of the last year, often to an unreceptive audience.

The report’s three main composite indices, the National Index, 20-City Composite and the 10-City Composite all marked year-over-year growth. It was the first time for it since the summer of 2010. On a monthly basis, all 20 Metropolitan Statistical Areas (MSA) reported higher home prices in June versus May. Only Charlotte and Dallas reported decelerated annual rates, and just 6 MSAs were still seeing negative annual comparisons.

Composite Index	Monthly Change	Annual Change Q2
National Composite	+6.9% Vs. Q1	+1.2%
20-City Composite	+2.3%	+0.5%
10-City Composite	+2.2%	+0.1%

The news certainly appears good enough, and a view of the trend lines likewise offers an attractive picture. So why were Professors Case and Shiller concerned then? Their comments on Bloomberg Radio sounded very similar to my macroeconomic musings of the past year. Case and Shiller took note of the slowdown in China, it seems, because that would be the new factor at play these past few months versus older history. Their warnings were vague though, indicating that these slowing and contracting economies must carry some weight and weigh against the U.S. economy in some way, and housing by default. Sound familiar?

Over recent months, I’ve been swimming against the tide with my warnings about the European economy, how it would impact the world, and its unavoidable impact to the real estate market and housing industry. However, my views are complex, because while warning against housing stocks generally, I’ve also noted the existence of corporate specific benefits from market share gain, multi-family construction (for rentals) and the tight supply of new homes available for sale. Companies like Toll Brothers (NYSE: TOL), PulteGroup (NYSE: PHM) and D.R. Horton (NYSE: DHI) have benefited from these factors. Still, I warn about the strong tide that might washout all players.

Also, while you might expect economic recession to coincide with home price deflation, I do not see that scenario as most likely here. As the dollar comes under increasing pressure, hard assets will rise. Also, mortgage rates at record low levels, could quickly shoot higher as factors I see at play change the lending environment in the U.S. and globally. I’m reportedly out on a limb with my inflation fire setting, but when it happens, mainstream pundits and economists will say, “Nobody could have foreseen this.” It wouldn’t be the first time or the last, but until I’m more widely followed, I will garner little credit for forecasting events like the downfall of the real estate market and the financial sector. The cost of homeownership, including home prices and the cost of borrowing, will increase and price many out of the home market for a long time, in my view. This is the reason I authored my report, “Time to Buy Real Estate”. Such change would also do harm to investors in high yielding mortgage REITs like Annaly Capital (NYSE: NLY) and American Capital Agency (Nasdaq: AGNC).

The reaction of the SPDR S&P Homebuilders (NYSE: XHB) today to the home price index is telling of the confusion and concern currently about housing. The XHB was up to start the day, sank into the report and rose on it. However, it has since retraced ground into the red. It’s a sign that the market is beginning to understand the interrelations of the issues I’ve discussed over the last few months. Finally, Case, Shiller and I agree that while recovery should be underway, new factors are undermining it.

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.

Are Higher Rates Scaring Homebuyers Into Action?

The latest reporting of Weekly Mortgage Applications by the Mortgage Bankers Association (MBA) produced an interesting result. While overall activity dropped significantly on a spike in mortgage rates, applications tied to home purchases actually increased. This begs to question whether a counter-intuitive allowance of rate increase might actually help the housing market. Before I lead you on too far, you should know that I’m relatively certain the answer here is no, and I’ll tell you why.

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.

The MBA’s Market Composite Index, measuring overall mortgage application activity, dropped sharply 7.4% in the period ending August 17. The decline was clearly driven by a dead stall in refinancing activity, with the MBA’s Refinance Index falling 9.0%. This was all driven by a marked increase in mortgage rates through the period.

Average Contracted Mortgage Rates & Changes Across Loan Types

Loan Type	Rate	Rate Change
30-Year Fixed Rate w/ Conforming Loan Balance	3.86%	+10 Basis Points
30-Year Fixed Rate w/ Jumbo Loan Balance	4.11%	+8 BPs
30-Year Fixed Rate w/ FHA Backing	3.62%	+9 BPs
15-Year Fixed Rate Mortgages	3.15%	+3 BPs
5/1 ARMS	2.74%	+1 BPs

Yet, purchase activity increased through the same period, with the MBA’s Purchase Index rising 0.9%. Now, you could argue that the purchase of a home is not a nimble action like the refinancing of a mortgage is, and that the increase therefore is more likely reflective of rates and other factors over the last several weeks. This is an important point and the best argument against the thesis that rising rates might drive homebuyers on the sidelines into action.

Still, many in the industry believe that falling home prices (over the longer term) and falling mortgage rates have had many prospective homebuyers waiting things out. The same theory would thus imply that a sudden jolt higher for mortgage rates in conjunction with the latest increase in home prices could help the housing market. The latest action might incorporate such a psychological draw, with some number of special cases waiting for the best time to buy real estate. However, the latest increase really is more likely just due to the length of time it takes to decide on, contract for and buy a home, and to be rid of any old property held in an illiquid market.

It would be a risky game to play if the Fed were to actually attempt to target higher rates now, assuming they could. I say that because of the great demand for U.S. debt instruments as a relative hedge against external risks. This works to drive rates lower. Most economists would likely warn that a rate increase now would only serve to send the U.S. economy into recession. Our economic recovery out of the financial crisis has been burdened by the tighter lending regulation and higher expectations of mortgage lenders. Institutions like Bank of America (NYSE: BAC) are still working through bad loans and fending off demands of mortgage-backed security holders and insurers, who are demanding to be made whole for alleged faulty loans written by BofA, J.P. Morgan Chase (NYSE: JPM), Citigroup (NYSE: C) and others.

Thus, on net, higher rates would certainly hinder economic recovery and cyclical housing activity. Recession happens to be my current expectation for our economy as is - for this year if not in 2013. It’s the reason why I’ve been recommending stock investors avoid the high-flying housing stocks like Toll Brothers (NYSE: TOL), PulteGroup (NYSE: PHM) and D.R. Horton (NYSE: DHI), which have been benefiting from demand for new homes in a special situation - tight supply environment; and from multi-family residential property construction for rental; and from market share gains from smaller builders. The SPDR S&P Homebuilders ETF (NYSE: XHB) has gained dramatically over the course of the last year. Still, I feel the more important macroeconomic driver will force a tide too strong against them soon enough, and at least see it as a risk not worth taking with other options available for capital. But the new home market and its builders are part of a special situation, and relatively small with respect to the overall market.

Today, Existing Home Sales were reported 2.3% higher, but that followed June’s sharp drop in activity. Sales at a 4.47 million annual pace actually fell short of economists’ expectations for 4.5 million for July. So, despite the headlines, the real estate environment is still far from robust and thus vulnerable to economic shock catalysts like rate increase.

In conclusion, I think it’s safe to say that while there likely is a curious draw provided by higher home prices and mortgage rates for a few shy real estate watchers, on net there would be an overwhelmingly destructive effect to the overall economy and the real estate market by a rate increase today.

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.

China Real Estate Insight

A fresh perspective was provided on the state of the Chinese real estate market Wednesday when China’s leading residential real estate developer reported its first half results. China Vanke sounded a lot like the National Association of Home Builders (NAHB) often does here at home, as it blamed banks and the government for its bad news. Truth be told, big lenders have opened up to more lending, just not in the mortgage market – at least based on the latest data out of Bank of America (NYSE: BAC).

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.

America’s biggest builder, PulteGroup (NYSE: PHM), could not have said it any better, when China Vanke complained that government efforts to mitigate China’s once quickly expanding real estate bubble was hampering its operation. Vanke said hawkish Chinese Central Bank actions of the past, which it is now reversing, plus real estate industry focused initiatives to curb speculative investment have basically been effective. However, Vanke put it a different way, noting that the efforts have forced developers to lower prices (aka stopping the bubble) and slow investment. That’s not a bad thing if smaller poorly capitalized operators are acting speculatively. Vanke indicates that this could lead to a housing shortage in the coming year. Gee, that sounds familiar… I think I’ve heard the same thing from Hovnanian (NYSE: HOV) to D.R. Horton (NYSE: DHI) to you name the American builder… The new home market here at home may be short inventory, but the overall real estate market remains flooded.

Vanke indicated that smaller enterprises have reduced new construction. The developer said starts were down 15% in the second quarter, year-to-year, and its realized prices were down 11% in the first half. China has reason to be careful though, as real estate development has contributed 10% to GDP over recent history. Some have reported signs of life among solid market drivers, with first-time home buyers and move-up buyers picking up activity in the second quarter.

There is risk that a shaken Chinese authority might ease restrictions too aggressively if Chinese GDP slows too much for comfort. If that happens, then perhaps fear of collapse will drive eventual catastrophe, just like what happens here every three years or so.

Chinese shares were hardly shaken Wednesday, with the Shanghai Shengzhen CSI 300 up just fractionally and the Hang Seng down fractionally. In later trading, American traded China focused portfolios looked better, with the iShares FTSE China 25 Index (NYSE: FXI) up about 0.2% after a better start. The Guggenheim China Real Estate (NYSE: TAO) security better reflected the real estate news back home, as it declined 0.2% on the day. In comparison, American shares were slightly higher, with the SPDR S&P 500 (NYSE: SPY) up fractionally and the SPDR S&P Homebuilders (NYSE: XHB) up 0.8% Wednesday.

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.

Time to Buy Real Estate

If you can afford to invest in it now, it’s time to buy real estate. Housing may never be more affordable again in most markets. Mortgage rates are at record lows and based on a recent report, home prices are on the rise again. So, for those who have a safe store of wealth, strong job security and are not living in their own home yet, I suggest investing in real estate now. Those who are a bit better off, might wisely add income earning property to their portfolios. Even as the economy slows anew, threatening to stymie real estate demand, I see other factors that could price real estate out of bounds for most Americans in the future.

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.

Buy Real Estate

The Federal Reserve’s efforts to stop the bleeding in housing and rejuvenate the critical sector have combined with international issues to drive U.S. interest rates down. Mortgage rates seem to strike a new record low each week, though the impact to housing demand has been diffused by ongoing economic sluggishness. Yet, those who can afford to buy a home should not let the inability of others affect their decision making now, or risk missing an opportunity to secure unprecedented low fixed mortgage rates.

Tuesday, S&P Case Shiller reported a 0.9% increase in its seasonally adjusted 20-city composite index for May. The increase followed a 0.7% surge in April. Economists were looking for a 0.5% price rise, with the range of forecasts stretching from 0.0% to 0.8%. The result therefore exceeded not only the consensus of forecasts but the entire range. And growth was widespread too, with 20 of 20 MSAs recording price rise in May. Also, on an unadjusted basis, both the 10-city and 20-city composites noted 2.2% increases.

These two factors, low rates and rising prices, should be drawing those interested in home purchase into the market. However, Bank of America (NYSE: BAC) just reported it funded 3.6% less residential mortgage loans in its second quarter. The nation’s major mortgage lenders, like BofA, Wells Fargo (NYSE: WFC) and Citigroup (NYSE: C), are burdened though by claims of mortgage security holders and insurers that improprieties effected faulty loans, and thus infected pools of securities. BofA and others are finding Fannie Mae (OTC: FNMA.OB) passing more loans back to them as a result. Until this pressure eases, the banks are going to be less free to lend, but that shouldn’t stop you from applying for a mortgage loan if you can qualify.

The news of many Americans gravitating to rentals, with vacancy rates on the decline, should neither scare those who can afford to buy a home to seek one. Billionaire Warren Buffet, Chairman and CEO of Berkshire Hathaway (NYSE: BRK-B), along with other market mavens have advised investors to buy into fear, and I advise the same now for those who can afford a house and qualify for a loan.

It seems seasonal spring sales strength has eased, with the latest New Home Sales and Existing Home Sales paces declining at last reporting. Major homebuilder shares have taken a hit recently as a result, with the SPDR S&P Homebuilders (NYSE: XHB) feeling more heat Tuesday, declining 2.1%. Individual homebuilder shares were struck even harder, with PulteGroup (NYSE: PHM), Ryland Group (NYSE: RYL), Toll Brothers (NYSE: TOL) and Hovnanian (NYSE: HOV) down between 1.7% and 2.9% Tuesday. I’ve been adamant about selling the cyclical homebuilder stocks ahead of the economic softness I see ahead. But buying real estate is not synonymous with buying homebuilder stocks.

Despite my concern that the softening economy must impact the real estate sector, I like real estate for investment now. I even believe the S&P Case Shiller data might soon reverse again, especially with the latest release of foreclosure property; and yet I still say buy real estate. I expect mortgage rates to decline further near-term, and yet I favor buying real estate now. Why? It’s because prices and rates are good enough now, and what lies ahead scares the heck out of me.

I see a real chance for a state of affairs where mortgage rates are too high for most of us to afford or to qualify for auto, home and other loans. I see dollar dilution and fiscal fallout, and possibly other external factors, leading U.S. treasury yields and other interest rates much higher. So rather than wait for potentially better housing affordability in the near-term, I recommend real estate now for those who can still afford it.

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.

Home Builder Confidence to Prove Fleeting

Earlier this week, the National Association of Home Builders (NAHB) reported that its Housing Market Index indicated builder confidence was significantly improved in July. It was still, deeply depressed, but improved nonetheless. Well, as the week progressed and the data flow continued, we couldn’t help but wonder if this new found builder confidence might prove fleeting.

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.

Home Builder Confidence

Home builders like PulteGroup (NYSE: PHM) and K.B. Homes (NYSE: KBH), along with many more smaller builders, indicated newfound joy in a Housing Market Index (HMI) six point surge to a mark of 35. It was the most important monthly increase in almost a decade, placing the index at its highest point since March of 2007. You remember those days, when the Fed chief was saying the crisis would be contained to real estate.

Each component index of the HMI rose, but the scent of hope, perhaps not well-founded, certainly skewed the news. The component index measuring current sales conditions improved six points to a mark of 37, still 13 points below so-so market conditions. A mark of 50 delineates where the majority of builders’ views would be positive versus negative. Thus, on all measures, they are still depressed. Continuing, the index measuring the traffic of prospective buyers gained 6 points to reach a mark of 29, still 21 points short of break-even. Finally, the index indicating hope, where builders provide their view for the next six months, saw confidence swing 11 points higher, to 44 (still 6 points under). So, as you can see, the good news would still make most people cry.

Regionally speaking, each segment of the national market reflected some sort of improvement. The greatest gain and market view was found in sunny California. The Western part of the nation had builders raising their confidence view 12 points, to 44. The next best real estate market was the good old Northeast, where the market is dense and mature. The Northeast gained 8 points to a mark of 36. The Midwest rose 3 points to 34, while the South increased 5 points to 32.

The Chairman of the NAHB, Barry Rutenberg, was clearly enthused, as he noted the benefits of home ownership at such affordable mortgage rates, record low in fact. The Chief Economist of the NAHB, David Crowe, might have to eat some soon. He said, “…this report adds to the growing acknowledgement that housing – though still in a fragile stage of recovery – is returning to its more traditional role of leading the economy out of recession.” I say, there will be no leading of anybody anywhere, but falling back into the pit of despair as the economy deteriorates under the weight of still vulnerable labor conditions, Europe and weakening global trade.

As the week progressed, the housing market news got a lot less cheery. The U.S. Department of Housing and Urban Development snapped some to their senses when it reported Housing Starts for June. Starts improved 6.9% above May’s accounting, to an annual pace of 760K, yes. But Permitting for housing starts, the forward looking indicator here, fell 3.7% in June, to 755K. Single-family project permitting only increased fractionally, while single-family starts rose 4.7%, to 539K.

Thursday, Existing Home Sales, granted - not the realm of home builders, fell 5.4% to an annual pace of 4.37 million in June. That sent the shares of the SPDR S&P Homebuilders (NYSE: XHB) and individual builders including Toll Brothers (NYSE: TOL), D.R. Horton (NYSE: DHI) and Beazer (NYSE: BZH) lower immediately after the report was released at 10:00 AM EDT. However, the group had recovered by the close of trading.

While these two relatively pessimistic data points, in my view, are not overwhelmingly so, they are indicative of the weight of nascent economic strife upon the important housing sector. Thus, even as housing gets some benefit from the lowest cost of homeownership in a long while, on home price decline and mortgage affordability, the weight of the broader economy is coming down on the market now.

I’ve been noting that the fate of all builders is not necessarily the same, with the future of smaller builders bleak against the large publicly traded group, including the likes of Hovnanian (NYSE: HOV), Lennar (NYSE: LEN) and Ryland Group (NYSE: RYL). They’re gaining market share from the poorly capitalized and suddenly struck smaller players, but the condition of the broader environment weighs on them as well. Still, I think if large builders were asked in isolation how they felt about the housing market, the HMI reading might sit above 50 today. That’s not the case though, and is all the more reason to believe the hopeful view of the home builders generally, will likely prove fleeting in the months ahead.

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.