When the 2008 crisis hit in late that year, the Fed realized (way too late) that artificially inflated house prices had been at the root of the problem– specifically the toxic debts that had been lent on overpriced property. It decimated the banks’ balance sheets, and drove consumers into hiding.
Understandably then, the government targeted house prices as part of their plan- they lowered interest rates and printed money. Since then, consumers have come out of hiding and banks have been repaired. But housing is still at the core of everything, and could we be seeing early signs of that recovery stalling…?
Close to my home a new, upscale gated community just broke ground. There was a big whisper about how there would be a waiting list for plots. This seemed to fit what we’ve been seeing lately as people snapped up property. Anyway, I drove over there to take a look around. I expected to see peoples’ names on the lots as they’d all been reserved.
They were almost ALL still available. Very few sold, very few being built. What’s going on? Maybe the market, as usual, could be our crystal ball…
Here’s the 3-year chart of the ETF for homebuilders, XHB:
As you can see above, it’s flatlined somewhat, and what XHB does next could make or break. The wavy blue line there is the significant moving average price, and I don’t care for how XHB is ducking above and below it- such action is usually indicative of a transition phase. Let’s zoom in…
XHB must hold above $30 for things to not come undone.
The author has an interest in the securities discussed in this article. Source of charts: stockcharts.com
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