Posted on 08/10/2005 8:34:35 AM PDT by Fruit of the Spirit
Even before the Federal Reserve announced its tenth recent increase in interest rates Tuesday, key financial players already knew that the housing bust had arrived. Home prices continue to rise, and new building is frenetic - but that's typical of the last gasps of a bubble. At the same time, those on the inside at major home-building companies are selling shares of their companies' stock - and at a brisk pace.
Do they sense that the housing bubble is about to burst? We think they know better than most. For the first half of this year, executives at home-building companies - those with market caps exceeding $500 million - sold off a total of $671 million worth of stock, compared to $189 million for the same period last year, according to Forbes magazine.
Robert and Bruce Toll, co-founders of Pennsylvania-based builder Toll Brothers, have unloaded $441 million worth of stock since last November. And this year, execs at home-building firm NVR have sold $125.4 million worth of stock - more than double the $54.3 million they unloaded in the first half of 2004.
[MoneyNews from NewsMax.com]
(Excerpt) Read more at newsmax.com ...
People knew the rate rise was coming. It's factored in to the market. This is just temporary, due to the media hype of late. Some markets (e.g. San Francisco) are a bubble, but the rest of the country needs housing, and will continue to need it.
Insider selling by large share owners of home builders may or may not presage some softness in the market. Absent an understanding of their total holdings, it is more likely a prudent financial strategy to diversify out of their highly valued, concentrated holdings into other investments. Would you keep all your eggs in one basket.
Many bogus newsletters hype that insider sales tracking is a leading indicator of downturns, but there is little historical backing. Each company and seller is unique and more in depth analysis is required. Insider buying is a more reliable but still often misleading indicator.
One indicator that the stock market as a whole is unconcerned about this activity is the resilience of the subject company's per share price during the same period. The demand for these shares has been easily consumed by the market and represent only a fraction of each stocks cummulative float for the same period.
If you're asking what the effect of the as yet non-existent housing bubble bust on the stock market, you'll need to look at history. But then, history in economics rarely repeats. Ignore such goofiness, diversify your investments, and focus on relative valuations when making investments. Simple rules that take the mitigate the impact of market peaks and troughs.
Hopefully, you're no longer holding any REIT's. They seem to be the only sector that's been pummeled up to this point.
Nah, that makes too much sense. It's more appealing to think we've never had it so bad and it's the end of the world. Every generation does it.
Over the next few years I guarantee that housing, energy, etc. will continue to play their small bit parts. The US economy is really big and moves forward regardless. Stocks prices will keep rising in general, but my money isn't assuming this huge growth we've had over the past 3 years to continue.
Over the next few weeks, I guarantee that stock prices will fluctuate.
No doubt there's some regional bubbles, but overall housing looks strong to me.
I'd like to see everyone that wants to own a home on an acre with a white picket fence and garden in the back realize that dream. A nation of property owners portends well for individual rights, and these owners will eventually roll back the socialist policies infecting the country.
Smarxist growth scams are already in the crosshairs.
Is it cold out on the limb?
The insiders aren't not the only ones selling.
I was curious as to why over the past year so many screens kept picking up homebuilders like HOV, KBH, TOL, etc. Now all I can justify is CTGI and WLS-- and those are only housing-related companies. I was really trying to find something in the sector, but now I think the luster is gone.
Retail anyone?
The Administration masterfully handled the 911 crisis: If gore and his boys would have been inn charge we would still be in a depression. But rates have to come back up.
The real estate markets - like all markets - see fluctuations. The more poorly thought out sepculations get culled. That is the way it should be.
There are broader considerations to FED policy than the real estate market. If, for example, the dollar is not brought to reasonable value, commodity producers will reprice in another currency or in a currency basket. That helps us little.
Or, if you have stones and money to burn, short the homebuilders.....
You better watch yourself, you are makeing too much sense.
Greenspan really controls the economy - I thought you knew that.
All low interest rates did for new buyers was jack up the prices of houses
Those who already had mortages were the ones that benefited
Initially, the usual, overly emotional suspects will take their money and run, leaving the market in the hands of those of us who actually look at the fundamentals of the companies listed there. Also, it appears we may be in for a two-fer. Oil prices are way overinflated, based on emotion not logic. So, there may be deflation in both the stock market and the oil commodity over the next year or so. In the long run, this might actually help things in the long term. Savings rates ought to increase and debt ought to be reduced, after the initial wave of defaults.
RE: The more poorly thought out sepculations get culled. That is the way it should be.
Yep!
When will the oil bubble busrt?
Just like everybody in ancient Egypt knew that the Pharaoh made the annual Nile floods.
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