Housing: It’s Different This Time

By William Trent, CFA of Stock Market Beat

Toll Brothers F4Q06 (Qtr End 10/31/06) Earnings Call Transcript – SeekingAlpha

As we previously announced, this quarter’s results were negatively impacted by a higher than normal 585 cancellations. With these cancellations creating unintended specs, we could face increasing margin pressure as we seek to move these homes. Right now it’s a great time to buy a new luxury home. Builders are motivated to sell their specs and the fundamentals that typically lead our industry out of the slowdown are already in place. Interest rates are near historic lows, unemployment is near an all-time low and the stock market is setting records.

The thing is, interest rates and unemployment were near all-time lows when the housing downturn started. What makes them think that those factors will help the market improve now?

The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: FedEx (FDX) put options; Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Lion’s Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Ceradyne (CRDN) put options; Lion’s Gate (LGF) call options; Dell (DELL) put options; Plantronics (PLT) put options

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