Thursday, November 5, 2009

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

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 (2294 views)
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15 thoughts on “Investor tip; fall of housebuilder share price often leads house price falls

  • 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.
    Link:
    http://www.thisismoney.co.uk/news/article.html?in_article_id=492872&in_page_id=2

    Bull trap over…

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  • ( 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?

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  • 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.

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  • Correction:
    maybe what we thought was the peak was not the peak.

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

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  • Article based on HPC’s Dr Bubb – Michael Hampton , nice to see him being quoted in Moneyweek

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  • 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.

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

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  • luckyjim – yep it must be true. It’s an Epistle of St Dominic, the Gold Apostle.

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  • 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.

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  • 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 [email protected] that gets built.

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  • @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.

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

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  • 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!

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  • 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!

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