July New Home Sales Tank

Investment Research Dynamics

uly is typically the 2nd or 3rd best month of the year for home sales.  This should especially be true  this year given that mortgage rates are at their lowest in almost a year and the banks are relaxing credit standards.  But today’s new home sales report showed the lowest monthly rate of sales since March and it was well below the sales rates reported during the so-called “polar vortex” months.

I have presented a detailed analysis of new home sales which you can read here:   July New Home Sales

One of the best areas to make money in the stock market right now is in shorting the homebuilder stocks.  These stocks are insanely overvalued based on historical fundamental market metrics.  This is an incredible opportunity to take advantage of a sector of the market that is not widely followed.  The big mutual and retirement funds holding long positions have their head in the sand are not compelled to sell, especially since the general stock market hits new record highs everyday.  HOWEVER, the homebuilder sector per the DJUSHB is down nearly 13% since it hit a peak in May 2013 while the SPX has risen nearly 20% in the same time period.  What does that tell you?

I have two homebuilder short ideas for which I’ve written a detailed fundamental analysis in support of my price targets for these stocks.  Both plays offer significant profits if you are patient with the market and let the fundamentals blow these stocks up.  I have included a section on call and put option strategies in the second report.  You can access them here:  Homebuilder stock short-sell plays.