Home > Uncategorized > Home Resale Closings In May Move Down Unexpectedly

Home Resale Closings In May Move Down Unexpectedly

Home resale closings declined unexpectedly by 2.2% in May to a 5.66 million annualized pace. “While both sales measures had surged about 15% over the prior two months, contract signings data suggested further gains in May boosted by one-off tax incentives. The NAR cited potential ‘processing delays’ for the May weakness, which could extend a high level of closings into June,” according to Citigroup.

“More importantly, policy distortions aimed at boosting housing are likely to result in some renewed drag from housing again during the second half 2010 as one-off incentives don’t represent a sustainable underlying source of demand. Mortgage application volumes point to declines in home resale closings in the July/August time frame,” the analysts add.

As an initial result the homebuilders were solf off quickly on release of the news. KB Home (KBH) traded quickly down to $11.66 on capitulation type volume. Toll Brothers (TOL) traded in the same fashion. If you have been watching the homebuilders you would recognize the fact that they have been extremely weak and quite possibly had priced in the worse already. The price action would at least point us in that direction. In a fairly weak trading day, the homebuilders have gone positive on the day and are showing great relative strength.

We will continue to watch the price action and if the market gains some strength, we may get a quick move up in this sector which has been heavily shorted.

Benzinga

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Categories: Uncategorized
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