Big Board Toolbox

[cta751]

Housing news out today, gotta love this as most of them made some gains today.

I took some march 5.00 puts on BZH yesterday, small risk with some big potential IMO

Analyst Note: Housing Bulls 'Too Early'
Tuesday March 4, 11:27 am ET
Deutsche Bank Analyst Says Housing Optimists 'Too Early' As Prices Need to Fall Further

NEW YORK (AP) -- Investors expecting a housing recovery to start in the second half of the year are overly optimistic, Deutsche Bank said Tuesday.
The bank said expectations of a recovery are based on trends in volume statistics such as new home sales and construction. Such analyses, which are based on past housing cycles, may be "flawed," the bank said.

"Home price declines, not volumes will be the primary determinant of ultimate housing recovery," analyst Nishu Sood said in a note to investors Tuesday.

Housing stocks have rallied in 2008 after nearly two years of sharp declines as some investors anticipate the housing market hitting bottom later this year. Stocks typically react six to nine months ahead of the market.

The hope is based in large part on recent data showing new home sales and housing starts nearing historical lows. Prices, too, have fallen sharply in recent months.

But Sood said the run-up in home prices during the five-year bubble was unprecedented, and that the subsequent decline will likely also be unique in the sector's history.

Prices rose four times faster than during any other increase and in twice as many local markets, he said. Median home prices have slid about 10 percent since their peak in 2005.

Most analysts have taken the price declines as positive news, saying that will increase affordability and spur demand. But Sood said the declines can also retard any recovery. He said the declining prices will lead to an increase in negative equity, which means homeowners owe more on their mortgage than the house is worth.

"Not only does negative equity increase the probability of default, but also it hinders homeowners from moving, dampening demand until home prices have substantially recovered," he said. "We think some investors may be getting optimistic too early, as a sharp recovery in volumes is unlikely in the second half of 2008."

Story Link