Thursday, Nov 05, 2009

Investor tip; fall of housebuilder share price often leads house price falls

MoneyWeek: Watch out: the housing market is about to turn back down

House prices are rising once again, bullishness is back, estate agents are running low on stock, and the practice of gazumping has returned. In other words, 'normal' practice has been resumed. Look at the main stages of a bubble above and see what happens shortly after things 'return to normal'.

Posted by rob moore @ 12:38 PM (2262 views)
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1. alan said...

This is the 3rd post of the article. I know some of us are bears, but....

Useful info from Network Rail today about job cuts. This won't make us keener to go out and buy up all those overpriced houses. Therefore (with other bad economic news) prices will not rise again this month.

Bull trap over...

Thursday, November 5, 2009 01:07PM Report Comment

2. 51ck-6-51x said...

( Well, since this third post (a) works and (b) has a comment against it I'll comment here. )

The share prices of such companies may well usually be a reliable leading indicator for the housing market, but will this hold during QE?

Thursday, November 5, 2009 01:15PM Report Comment

3. 51ck-6-51x said...

Also, this is classic chart-ism ( using charts to show what one wants ) - yes there may be a leading correlation but w e do not know for sure that what we currently perceive to have been the peak actually was the peak. In the chart that shows Barratt & house prices Dominic points to "False Breakdown" - we do not know if we have had the house prices that were led by the peak in Barratt yet, maybe what we thought was the peak was ( note the variance in the lead time over the course of the chart ).

I buy that there may be some relationship here, but the attempt to use it does not seem robust.

Thursday, November 5, 2009 01:23PM Report Comment

4. 51ck-6-51x said...

maybe what we thought was the peak was not the peak.

Thursday, November 5, 2009 01:25PM Report Comment

5. 51ck-6-51x said...

( ^^ This does not change my position by the way, I am still fundamentally bearish! )

Thursday, November 5, 2009 01:26PM Report Comment

6. sybil13 said...

Article based on HPC's Dr Bubb - Michael Hampton , nice to see him being quoted in Moneyweek

Thursday, November 5, 2009 01:59PM Report Comment

7. luckyjim said...

He's given four examples in his article where the share price of developers was NOT been a reliable indicator. And none of those cases was in unique circumstances (unlike today).

Also, in the end, isn't this just puuting all your faith in the chief economist at Barrats and assuming he knows what he's doing (and that share price reflect's his company's forcast etc)

Oh wait, I forgot, there's a chart. I was going to dismiss this but there's a chart so it must be true.

Thursday, November 5, 2009 02:03PM Report Comment

8. Karma4all said...

Does MoneyWeek ever call anything correctly?
I like to read their articles, they make feel secure as I hibernate, perhaps one day ...

Thursday, November 5, 2009 02:23PM Report Comment

9. icarus said...

luckyjim - yep it must be true. It's an Epistle of St Dominic, the Gold Apostle.

Thursday, November 5, 2009 02:30PM Report Comment

10. str 2007 said...

I quite liked moneyweek articles. I hope they're right with this one, however, with their constant Gold ramping and this article which is almost written as Gospel I'm just beginning to wonder.

Does anyone know what their opinion of house builders shares was in the summer of 2007 when the government had just announced a massive building programme (which interestingly hasn't happened).

On the face of it House Builder shares would have been a good bet with that bit of news but then went on to loose 90% of their value.

I have to agree with luckyjim & 666 I think on this one. A bit of a flimsy reason to assume house prices WILL fall.

Thursday, November 5, 2009 03:20PM Report Comment

11. timmy t said...

Maybe people have realised that their houses are pants and that's why their shares are falling. People are being a bit more selective about what they buy rather than just buying any old cr@p that gets built.

Thursday, November 5, 2009 03:47PM Report Comment

12. Wernerburger said...

@str 2007
Moneyweek were uber bearish on House builders back in 2007 and printed loads of articles saying sell, but they've been fairly bearish on housing for as long as I can remember.

Thursday, November 5, 2009 03:57PM Report Comment

13. doomwatch said...

this is boll ocks. I'm suprised MW printed this. Maybe MSW is on holiday.

Thursday, November 5, 2009 03:57PM Report Comment

14. shipbuilder said...

51ck-6-51x - are you saying that what we thought was the peak might possibly have been a bear trap on the way to another peak? That would leave one huge drop to come!

Thursday, November 5, 2009 05:14PM Report Comment

15. smugdog said...

Ah Shipbuilder, 666, are you both suggesting that another graph exists?, other than the Holy Grail that is the "Bubbles Graph"? Could this mean that we could soon very well be worshipping another projection? Give me a sign!

Thursday, November 5, 2009 06:53PM Report Comment

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