The homebuilder stocks staged a dead-cat bounce higher this week. I have been saying that the builders were very oversold and would likely engage in a sharp short-squeeze rally. Today’s huge short-squeeze move – see this link – in the entire stock market added fuel to the homebuilder’s spike up.
I mentioned last week that the builders were due for a technically ‘oversold’ short term bounce. I also asserted that the builders typically rally into the NAHB homebuilder sentiment index and the housing starts report. Finally, I said a bounce up the 50 dma was likely and a continuation move to the 200 dma was possible.
The housing starts report today was driven by starts in apartment rental buildings. Just like during the original housing bubble, developers are going to over-build apartment buildings. This will drive rents lower, which will drive home prices lower. I’m already seeing some downward pressure on apartment rents in Denver and there’s several large projects in various stages of completion. I’m also seeing many more homes offered for rent in good neighborhoods than I’ve seen in the last 4 years.
Today the DJUSHB closed at the 50 day moving average.
This post was published at Investment Research Dynamics on October 18, 2014.
Follow on Twitter
Recent Comments