Wednesday, December 07, 2005

Housing Markets: Beliefs and Anecdotes Constitute Academic Research

12/07 03:52PM =DJ Homebldrs Biggest Losers Following Bearish Housing Report
By Janet Morrissey

NEW YORK (Dow Jones)--Homebuilding stocks were the biggest losers among 100 sectors of the Dow Jones index Wednesday as jittery investors appeared to react to an academic multi-report study that offered a bearish outlook for the group.

The UCLA Anderson quarterly report, released Wednesday, predicts U.S. housing construction will start declining in early 2006.

"Evidence is accumulating that the great housing boom of the past decade is coming to an end," said visiting scholar David Shulman, in the three-report study. "Higher interest rates and declining affordability are exacting their toll..."

...UCLA Anderson senior economist Michael Bazdarich admits his his group thought the decline would start in mid-2005, and it didn't. As a result, he now expects the slide to begin in early 2006. "We think the logic for this coming decline is powerful, and we strongly believe it is going to occur." Still, the indications are "mainly anecdotal" at this point, making it "too early to call the turn.

Now I know why contrarians usually outperform momentum investors.

Meanwhile, Centex Corporation, a homebuilder with 127.7 million shares outstanding, announced at 4:01 pm today that it completed a five-million share repurchase and authorized an additional five-million share repo plan; 1.5-million of those shares will be bought before the end of January. This comes after Beazer Homes, Inc., with forty-two million shares outstanding, authorized a ten-million share repurchase plan at the end of November.

It is almost always wiser to do what the owners are doing. I trust owners more than I trust academicians. Follow the money.