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April 26, 2006

Homes for Sale

Meritage Homes beat their number this morning, and the government reported a huge jump in new home sales for March. These two factors combined to pop the home builders about 2%, though the gain was only half the level seen in the morning. Some of the big winners include Meritage (up 8%), Pulte Homes (up 3%), and Hovnanian (up 2.4%). We hear results from Centex and Pulte this afternoon, while Beazer reports tomorrow morning. It will be interesting to see whether the enthusiasm continues in the wake of this onslaught of reports.

It should be noted that the jump in new home sales of 13.8% is a comparison with February, a month in which sales were seriously hampered by weather. Digging deeper into the government's report reveals that the median selling price declined 2.2% versus last March, giving us the first year-over-year decline since December 2003. Furthermore, the median selling price in March represents a nearly 9% drop from the high set in September. We see then that home builders achieved their fabulous sales spike by virtue of weather anomalies and deep discounting. The telling factors here are that sales prices are declining while inventory is stacking up. There is an implosion on the horizon for the homeys.

Silver's volatility continued, with today's coin toss landing on heads. The white metal tacked on 30c to close just under $13. I imagine we still have some 50-cent or even $1 days in our proximity, and I continue to twiddle my thumbs waiting for the dust to settle before making any moves. I must admit that I have considered selling puts into any big down day to capture the implied volatility premium. However, due to the level of risk in such activities, I currently regard those thoughts purely as a mental exercise.

Finally, our illustrious President was making rounds yesterday addressing gas price concerns. He ordered a probe into gas price manipulation as well as a freeze on purchases for the SPR until this fall. We will see more of this sort of pandering at the expense of industry and common sense as the election season approaches. Whether an immediate reaction to Bush's politics or simply market forces, oil coughed up about 1.5% today. One thing is for sure: whenever politicians sees fit to take center stage over an economic issue, the issue in question tends to continue its run.

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