Why Housing Stocks May Be Slowing Down

I write a lot about housing and real estate as a freelancer for many real estate investors around the country. Generally it is positive about buying a house instead of renting. I also write about foreclosure and bankruptcy; how to avoid both and, if you can’t get out by yourself there are options, such as sell for cash quickly to those real estate investors.  I have noticed that the high priced houses are selling fairly quickly in the market place, but the lower priced houses are having trouble. I suspect it is because the average American hasn’t seen any income or wage increases for at least 5 to to years.

An article in Seeking Alpha caught my eye. Why Housing Stocks May Be Slowing Down. Isn’t that just the opposite of the latest news? Andrew Sachais writes:

  • U.S. housing permits are slowing.
  • Moreover, housing starts and homebuilder confidence are also declining.
  • As sentiment recedes surrounding the industry, housing stocks could remain in a range over the next few months.

U.S. housing stocks could remain range-bound as confidence declines amid slowing building permits and housing starts. U.S. housing stocks are represented by iShares Dow Jones US Home Construction(NYSEARCA:ITB).

In April, the building permits figure came in at an annual pace of 5.18%, slightly above the previous month’s reading of 5.12%. After peaking in 2013 at over 33% annual growth, building permits have slowed to a more modest level, seen below. As the rebound in permits slowed, so too did actual housing starts.

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I took a look at (NYSEARCA:ITB)and was surprised by what I saw.

Daily ITB

 

I see a big divergence in price to the indicator. Does it mean just a correction to the action or is it forecasting trouble ahead? Watch to see if ITB can make a new high and watch the bottom. The last low was above 25. Breaking 25 would be a clear signal that housing/construction has changed.

Remember no guarantees on anything I wrote.

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