How Healthy Are Homebuilders?

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Sept. 24 (Bloomberg) -- In today's Triple Threat, Bloomberg's Julie Hyman, Raymond James' Buck Horne and Trading Advantage's Alan Knuckman discuss the outlook for homebuilders. They speak with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Are in a higher interest rate environment, the economy is going to have to be strong enough to support home prices that would effectively be more expensive for people in that they have a bigger monthly nut and higher interest.

That would be the assumption, that you have to have the economy ramping up enough to make up for the increase in rates.

If you looked at how the stocks performed, they have declined on the perception rates would go up and then you saw a rebound once the fed said we are not going to be tapering our stimulus.

If you go back to 1990, just because rates have been high, that alone has not been enough to print new home sales great if you go back to 1990, the 30 year mortgage rate has averaged about 6.7%. home sales have been about $733,000. mortgage rates are above where they are now.

You have a lot of other actors.

You have jobs market which has had a dampening effect.

Some analysts say look at the numbers and just because rates are going up, it's not going to be a long-term dampener.

It makes sense, especially if you have the graphics to support it grade demographic fix -- demographics, julie is right on it grade if the rates are going higher, the homebuilding rates go lower and vice versa.

Over the long-term, mortgage rates themselves don't drive housing demand.

Housing is still generally very affordable in most markets but what matters more is mortgage availability, particularly to first time buyers.

Mortgage availability is still very stringent.

It has improved ever slow slightly around the margins but it difficult.

You might even be able to make the argument that if we had higher rates than banks have a shot at making more money, they might need more willing to lend.

They might be, but we are seeing headlines coming across that thousands upon thousands of mortgage workers are getting laid off because they realize the refinance business is going away and there is a reality that the purchase business is not going to rebound quick enough to keep them all employed.

Citigroup is the latest to announce the today.

Do you agree people should be cautious?

I love the optimism.

I'm going to talk about the tray but if we look about the rates, the rates right now have only been above this one year in the last 20. so yes, we have had a bounce, but off an extreme, all-time forever low.

Things were worse than they are now.

It's not going to put that much pressure.

Technically speaking, there is some amazing support to lean on.

If you look at the chart, that's the january breakout.

I think april and august and june this year, i'm looking to buy an in the money call.

I buy a 25 call for march and my breakeven is $.50 higher.

Six dollars in the money, so i've got six months for good things to happen.

We could see a move to 36 in the trend to the other side.

We will be watching for it grade up next, the last time

This text has been automatically generated. It may not be 100% accurate.


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