I have been saying this for a while: You can’t have a housing recovery unless actual home buyers are involved.
We are very far away from seeing the housing market reach its 2005 highs…and as time passes, it becomes clearer that this generation may never see them again.
How can I say that?
What we have seen in the housing market since then, but mostly since 2012, in my opinion, is nothing more than a dead-cat bounce scenario—an increase in prices after a massive decline. The chart below shows how far off we are from the housing prices of 2005.
One of the key indicators I follow in respect to the state of the housing market is mortgage originations. This data gives me an idea about demand for homes, as rising demand for mortgages means more people are buying homes. And as demand increases, prices should be increasing.
But the opposite is happening…
In the first quarter of 2014, mortgage originations at Citigroup Inc. (NYSE/C) declined 71% from the same period a year ago. The bank issued $5.2 billion in mortgages in the first quarter of 2014, compared to $8.3 billion in the previous quarter and $18.0 billion in the first quarter of 2013. (Source: Citigroup Inc. web site, last accessed April 14, 2014.)
Total mortgage origination volume at JPMorgan Chase & Co. (NYSE/JPM) declined by 68% in the first quarter of 2014 from the same period a year ago. At JPMorgan, in the first quarter of 2014, $17.0 billion worth of mortgages were issued, compared to $52.7 billion in the same period a year ago. (Source: JPMorgan Chase & Co. web site, last accessed April 14, 2014.)
I still see too much optimism around the housing market. Let me make this very clear: I don’t expect an outright collapse in home prices like the one we saw when the housing market bubble burst in 2007, but I do see the momentum slowing down in the housing market, and this may result in lower home pr… Read More
If business conditions are good for a public company, then it’s highly likely that its share price has already been doing well in this great monetary expansion.
With the stock market at a high, it’s tricky being a new buyer/speculator. As we’ve seen with biotechnology stocks, the price momentum can quite suddenly come to a halt.
One sector where there is more price momentum to be had is in oil. Not so much in the large, integrated oil companies but in domestic mid-tier producers as well as services. (See “My Top Energy Pick with Market-Defying Momentum.”)
In the large-cap space, Baker Hughes Incorporated (BHI) is now experiencing renewed momentum, both operationally and on the stock market. This oil and gas equipment and services company is seeing solid sales growth in North American operations as well as the Middle East.
In spite of unusually cold weather accounting for a drop in North America’s well count, the company was able to grow domestic first-quarter sales by 6.7% to $2.78 billion. Total sales for the first quarter grew 10% to $5.7 billion, while earnings grew 23% to $328 million.
Baker Hughes has been buying back a lot of its own shares (3.4 million in the first quarter), and the stock recently began a new uptrend. The company’s two-year stock chart is featured below:
Halliburton Co. (HAL) is also experiencing renewed operational and price momentum on the stock market.
The largest oil and gas services company by revenue is Schlumberger Limited (SLB). Its first-quarter sales grew to $11.2 billion, up from $10.6 billion comparatively.
Diluted earnings per share rose to $1.21 from $0.94 in the same quarter last year. The company bought back almost 10 million of its shares during the first quarter, spending approximately $900 million.
Schlumberger is expected to grow its revenues in the high single-digits this year and ne… Read More
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