Wednesday, March 09, 2005

Housing Bubble Will Burst On Wall Street First

If you are wondering when the housing bubble will deflate, don't look at foreclosures, sales or median prices. The stocks of lenders and home builders will be the early indicator of a real decline.

The last few days and weeks could be giving us the answer. Today interest rates on the 10 year US treasury bond yield closed at 4.51%, well above even the 200 day moving average. Mortgage lenders and builders followed recent weakness in a broad sell-off. Fannie Mae continued on her downslide; Countrywide Financial dropped 4.8% and suffered a downgrade.

The home builders, many of which had reached all time highs recently, got punished. Toll Bros., Ryland Group and Pulte Homes were down over 3% each; Beazer Homes and DR Horton were both off over 4%.


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