Numbers are funny things. Take Monday's report from the National Association of Home Builders, in cooperation with Wells Fargo, for example.
Fans of homebuilder stocks like Toll Bros.
Source: Author's graph using NAHB/WFC data.
But ... this one goes to 11
But here's the thing: What you're looking at up above is just one small slice of the scale. In fact, the full HMI runs not from 0 to 35, but from 0 to 100. In order to be considered "bullish," you need numbers in the 50s -- and we haven't been there for quite some time. The last time the blue line up above (actual sales trends) touched 50s territory was May 2006. The red line (expectations for six months out) showed homebuilders abandoning hope of an imminent recovery about a year later, in March 2007. And as for actual foot traffic -- "boots in the atrium," as it were -- those started dwindling as far back as October 2005.
Too soon, too soon
As for how things stand today, well, the chart up above still shows actual foot traffic as the weakest indicator of the three, while the "pipe dream index" looks strongest. (Which may explain why homebuilders like Ryland
Call me a skeptic, but I wouldn't lay down a deposit on housing's recovery just yet.
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Fool contributor Rich Smith owns shares of MDC Holdings. Rich is not a licensed economist, but he plays one on the Web. Check out his latest stock recommendations on Motley Fool CAPS. Home Depot and Lowe's are both Motley Fool Inside Value selections and MDC Holdings is a Motley Fool Hidden Gems pick. The Motley Fool has a disclosure policy.