Revisiting the Homebuilders

Below we revisit our comparison between the Nasdaq bubble of the late 90s and the Homebuilder bubble of the 2000s.  The chart below highlights the performance of the two from the start of their enormous gains to their eventual peaks, and back down to their lows again.  As shown, the S&P 1500 Homebuilder index actually registered more gains than the Nasdaq at its peak, but the comparable time frame (both around 2,000 days) of the two rises is eerily similar.  The bursting of the Nasdaq bubble lasted 943 days with declines of 78.29%.  The current bursting of the Homebuilder bubble has lasted 831 days with declines of 67%.  While the declines have already been severe, for the Homebuilder index to decline to the low levels that the Nasdaq reached, it would have to go down another 34% from here.

Below we provide a list of US Homebuilder stocks.  As shown, most are down between 60% and 90% from their peaks reached in July 2005.  We also provide their estimated P/E ratios for next year, their current price to book ratios, and their debt to equity ratios.  While most have high valuations, some have decent forward P/Es and very low price to book ratios (although any writedowns will negatively impact book values).

 

Comments

[pj]

Thank you for this post. Now that the housing bubble has popped, next may be the Chinese bubble. I would like to see how the Chinese market would look superimposed on this Nasdaq and housing bubble chart. Thank you and keep up the great work.

[TALKING TECHNICALS]

Great Analysis. Homebuilders is not on my list of sectors to choose from at this point. I must say that your integration of data is superb. It is one thing to read a thesis on a topic, but to put it in visuals, tells a strong story.