By Gareth Soloway on July 19th, 2010 12:48pm Eastern Time
Housing, building and building supply stocks continue to see little rest from heavy handed sellers. After the government tax credit expired, these stocks have collapsed as the buyers of houses have vanished. The fact that there is no tax credit available and this has caused buyers to vanish should be no shock to anyone. In fact, the tax credit has been the only thing that has kept the housing market from having another leg down. Many may think that is a good thing, but as we see now, it was only postponing the inevitable. Instead of the next leg down in housing occurring months ago, it will now happen and has started to happen.
I expect housing prices to decline another 10-15% in the coming two years. In some areas, housing may drop as much as 20%. Many stocks will continue to see the brunt of this in their stock price. Stocks like The Home Depot, Inc. (NYSE:HD) and Lowe's Companies, Inc. (NYSE:LOW) area already trading at or near 52 week lows. Stocks like KB Home (NYSE:KBH) have seen their stock price cut in half in the last four months as they are also at a 52 week low. Even Toll Brothers, Inc. (NYSE:TOL) is trading near its 52 week lows, having fallen from a high four months ago of $23.67 to its current level at $16.25.
Bottom line is this, the housing recovery still is nowhere in sight. Housing prices will drop further in the next year. While all these stocks listed will most likely head generally lower, bounces should be played as short term swing trade buys at key levels. I will never short these stocks at their dead lows. Any thought of shorting would be held for a monster bounce. There is always money to be made if the entry is precise. To get these trades and others along with analysis, education and guidance, join the Research Center.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
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