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Is the housing market on the brink of turning corner? That depends upon whom you ask!
The Bull Case
True the bulls may be wearing blinders but that's not to say they haven't gotten some pretty positive catalysts.
The latest came from Lennar’s [LEN
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] president and CEO Stuart Miller who recently said "we're gaining confidence that we're getting much closer to the end of this housing-led downturn."
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And while the housing market and economy are still tentative, Miller also said the market "feels materially better than the absolute hopelessness that had existed for so long."
And you can't deny most of the housing data recently has been positive. In fact, it's expected to remain that way.
On Friday, the Commerce Department will issue its monthly report on new home sales and estimates show that sales rose 1.6 percent in August, a fifth consecutive month of increases.
Sounds pretty good.
The Bear Case
Still, plenty of negative factors vex the housing sector.
A tax credit of up to $8,000 for first-time homebuyers expires Nov. 30, and lawmakers have yet to decide whether to extend it.
Also, the Federal Reserve has been able to keep mortgage rates near historic lows, it's unclear how long that will last.
And last week Robert Toll, chairman and CEO of Toll Brothers [TOL
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] , sold 1.5 million shares of his own company. That’s hardly a move that inspires confidence.
In fact the best trade may be a bet on the downside. What must you know to game this sector? For insights we turned to UBS analyst David Goldberg.
Goldy, as the traders call him, tells Fast Money he's expecting a 20-25% pullback in the sector.
"Homebuilding stocks are overvalued and are pricing a V-shaped recovery and I don't think that's going to happen," he tells the desk.
Goldberg thinks higher mortgages, losing the $8,000 tax credits and/or increased foreclosures are all real catalysts that not only could send these stocks much lower but probably will.
"The trend is down," he says.
What's the trade?
"I'm negative on DR Horton [DHI
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] and Pulte [PHM
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] because they have big land positions," he says. "But generally I'd stay on the sidelines with the group."
"If you're looking for trades on the long side look at GFA [GFA
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] and HXM[HXM
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] , counsels emerging markets trader Tim Seymour. Both are plays on Latin America's housing market which is white hot.
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Trader disclosure: On Sept. 22nd, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour And Seygem Asset Management Own (MTL); Seymour Owns (AAPL), (BAC), (VALE); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Najarian Owns (C) Calls; Najarian Owns (JPM) And Is Short (JPM) Calls; Najarian Owns (MS) And Is Short (MS) Calls; Najarian Owns (MSFT) And Is Short (MSFT) Calls; Najarian Owns (PALM) Calls; Najarian Owns (RNWK) And (RNWK) Calls; Najarian Owns (SII) Call Spread; Najarian Owns (WFC) Put Spread; Najarian Owns (YHOO) Call Spread; Najarian Owns (FCX) And Is Short (FCX) Call; Najarian Owns (CELG); Najarian Owns (CLX) Calls; Terranova Owns (WFT). (F); Terranova Owns (F) Calls And (F) Puts
For Joe Terranova
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO
Virtus Diversifier PHOLIO Owns (IGE)
Virtus Diversifier PHOLIO Owns (DBC)
Virtus Diversifier PHOLIO Owns (DBV)
Virtus Investment Partners Owns More Than 1% Of (CAL)
Virtus Investment Partners Owns More Than 1% Of (DLR)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (SKT)
Virtus Investment Partners Owns More Than 1% Of (TNB)
Virtus Investment Partners Owns More Than 1% Of (UA)
Virtus Investment Partners Owns More Than 1% Of (CLB)
For David Goldberg
UBS Securities Has Received Compensation From (DHI), (PHM) In Past 12 Months
(DHI), (PHM) Is Or In Past 12 Months Has Been An Investment Banking Client Of UBS Securities
(DHI), (PHM) Is Or In Past 12 Months Has Been A Non-Investment Banking Client Of UBS Securities (Securities-Related Services)
CNBC.com with wires
Data is a real-time snapshot *Data is delayed at least 15 minutes