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There might be some good news coming out of the homebuilding sector. In July construction fell to its lowest level in more than 17 years!
That’s good news? Yes. Some economists believe the drop will reduce the glut of unsold properties, an important step for a rebound.
"Slower starts means less adds to inventory," said Adam York, an economic analyst at Wachovia Corp. "We have too much supply on the market."
But a reduction in housing starts might only be a piece of the puzzle. “Foreclosure every day dumps tens of thousands of homes on the market and that’s very hard to compete with,” says Bob Toll on Fast Money. The Toll Brother CEO thinks where we are in this cycle has to do with “how much more foreclosure is yet to come.”
“The big question is whether the deal Congress made reduces foreclosures,” says Toll. “If we have additional foreclosures then the market will go lower, if we don’t we’re probably at the bottom now.”
It’s interesting to note that Toll Brothers [TOL
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] has weathered the housing crisis better than many of its rivals.
Percentage Change YTD
Toll Brothers +8%
Homebuilders ETF -7%
Hovnanian -10%
D.R. Horton -18%
KB Homes -19%
“We try to stay alive by accumulating cash and selling as many homes without giving them away,” explains Toll “I think the difference between us and the other guys is that we’ve sacrificed volume to not sell below the value of the ground that the house is on.”
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Trader disclosure: On Aug 19, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (WMT), (MSFT), Macke Is Short (TM); Najarian Owns (AAPL) And Is Short (AAPL) Calls; Najarian Owns (CSCO) Call Spread; Karabell Owns (AAPL), (GOOG), (JPM), (SLB), (WFR); Terranova Owns (GS), (RIMM), (NOV), (POT), (EOG), (SU), (BNI), (IYT), (X), (YHOO), (INTC), (AAPL), (SA), (SA), (KOL), (VLO), (FCX), (CME), (GOOG), (XLF),
Terranova Owns (AIG) Puts; Terranova Is Short Crude Oil Time Spread (Short Dec. 2008, Long Dec. 2012); Terranova Is Long Crude Oil Futures (Dec. 2012)
Terranova Is Chief Alternatives Strategist Of Phoenix Investment Partners, Ltd.: Phoenix Investment Partners Owns More Than 1% Of (ABD), (ARE), (BRE), (CNTY), (CLB), (OFC), (DLR), (ESS), (EXR), (FL), (IAT), (IGE), (LNET), (MAC), (OIIM), (PSPT), (DBC), (DBV), (SLB), (SKT), (BLV)
Terranova Is Co-Portfolio Manager Of The Phoenix Diversifier PHOLIO: Phoenix Diversifier PHOLIO Owns (IGE), (DBC), (DBV)
Terranova Owns (GS) And Owns (AIG) Puts
Finerman's Firm Is Short (BBT); Finerman's Firm Is Short (SPG)
Data is a real-time snapshot *Data is delayed at least 15 minutes