This is an exert from another post;
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If housing was stretched, that should show up in the banks as rising bad debts.
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I went straight to Australia’s biggest home lender; I figured that would show me signs of an impending crisis.
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Commonwealth Bank released its trading update for the March quarter this week, and this is what I found: A 7.8% year-on-year increase in the volume of home loans sold, while bad loans were falling.
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If housing was ready to unwind, you’d think bad debts in Australia’s biggest home lender would be rising, not falling.
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If housing was ready to unwind, like Citi says, and if housing was really stretched, we’d see a softening in demand for companies connected to the housing sector.
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This is where it might show up first. You’d see a falling in demand and housing orders slowing.
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Are you looking at the 52-week new highs, or doing your scans?
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Because if you are, you’d see building- and construction-related stocks aplenty.
‘Adelaide Brighton Ltd [ASX:ABC], CSR Ltd [ASX:CSR], Dulux Group [ASX
LX], James Hardie Industries [ASX:JHX], and Lend Lease Group [ASX:LLC], to name just a few.
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If housing (read: land prices) had gone completely over the top, we’d start to see falling demand and declining revenues for these types of companies.
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In other words, in terms of the chart, they’d be breaking prior monthly lows from the past.
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But the opposite is happening — they’re all breaking higher and punching around new highs.
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That generally means these stocks are growing revenues.
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Conclusion: This building cycle still has steam to run.’
Not much more to add from me, really. The ‘
52-week new highs’ list tells you all you need to know.
So you can ignore the marketing exercises from Citi and elsewhere, until you start seeing the above mentioned companies in the 52-week LOWS column.
These companies will turn down in price
before a recession is even being mentioned in the news.
It’s yet another way you can judge where you are in the real estate cycle.
