Real Estate Bubble?
everyones talking about realestate right now and the media's constant hyping of flipping properties, imho, is helping to artificially inflate the entire sector.
the existance of a realestate bubble is a controversial topic right now. as greenspan continues to raise interest rates and slow the economy, how are americans supposed to afford houses as interest on lending inevitable increases? i was doing some research on realestate related stocks and REITs and i found something interesting.
TOL, Toll Brothers, a builder, claims that the real estate bubble is nonexistant. yet, i came across a piece of interesting info in nasdaq trader's blog. apparently, the management and owners have been selling million dollars of their stocks. i wonder why.... i have no idea whats going to happen b/c i dont understand the sector well enough, but it will be interesting to see what happens.
posted by jwu at 7/08/2005 07:42:00 PM
2 Comments:
shouldn't*
I believe Greenspan is somewhat puzzled by the strenght of the housing market and the little impact of his interest hikes on the 10 years note yield curve. There was a great opportunity to buy the stock (or calls) right after their earnings announcement because the overall market was flat at the time and there was not much excitement about this stock(especially after many stock holders felt they got burnt a few weeks earlier because of the insiders selling pressure when the stock touched 90 for the first time). I sold shortly before the fed announcement and this was a mistake. I overestimated the power of the fed. This stock (like LEN and KBH) has been acting very well ever since and it was a great play when it did retreat to 97. That being said, I think the Toll guys are just cashing in on their good work and they are probably anticipating a correction once the stock will split which should be normal and expected. I like the volatility of the stock regardless of the news or comments about the overall state of our economy. I also like the recent and healty downgrades on this sector. I will probably buy this stock below 99 before the split otherwise I would wait 2 or 3 weeks after the split before considering buying again. The goal would be to position myself before the next earning announcement for a momemtum play. TOLL is the first one of the group to announce their earnings and this needs to be considered when trading in this sector
Much can be said about the so called bubble but what I really like the fact that everybody is talking about it...meaning that it is a good time to be a contrarian. I do expect a normal correction and a slow down in the housing sector and some areas of the country are more at risk than others but this sector is red hot for now and for months to come.
Toll can be played in many different ways and but I also like less volatile names like KBH, LEN and I really believe JOE is the true long term play because of their great land holdings in Florida. M.
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