HOUSING AND REAL ESTATE STOCKS HAVE SOLD OFF ON THREAT OF RISING BOND YIELDS

HOUSING AND REAL ESTATE ARCHIVES... One of our readers asked yesterday if I had any thoughts on the housing sector. In fact, I've written several articles on housing over the last month. An August 5 headline read: "Real Estate Has A Bad Week". An August 4 piece was headlined: "Rising Rates May be Starting to Hurt Housing". A similar article was published on July 26. I point out these earlier messages to remind our readers that all of my articles can be found on the John Murphy page. Click on More Archived Updates at the bottom of the Recent Updates box. You can type the name of a group (or stock) in the "search" box for easier shopping. Checking the archives is a good way to review what I've been writing about the various markets.

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HOUSING AND REAL ESTATE SELLING ... Charts 1 and 2 show that investors have been selling homebuilding and real estate stocks during August. And they did so again today. DR Horton was one of today's biggest homebuilding losers along with Centex and PHM. Chart 1 shows the stock falling beneath its 50-day average and approaching a test of its March top at 34. Its relative strength line has turned down as well. The recent drop has brought the homebuilder to a short-term oversold condition. But the weekly and monthly charts (not shown here) show that the homebuilding group has reached a dangerously overbought level on a longer range basis. Chart 2 shows the Real Estate iShares (IYR) also tumbling on heavy volume during August. It may be too soon to call for the end of the housing and real estate boom. But it's not too soon to turn more cautious to protect one's existing profits. The main threat to housing is the potential for rising bond yields. Chart 3 shows the 10-year T-note yield hitting a four-month high earlier in the month. That was right around the time that housing and real estate stocks started to tumble. After pulling back over the last week, the TNX is bouncing off its 200-day moving average near 4.20%. Today's surprisingly strong PPI number may be one of the factors pushing bond yields higher. If that continues, it won't be good for the housing and real estate sectors.

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