Housing Top Was Sweet for KB Home Pair
Housing prices were reaching the stratosphere. Most real estate markets were seeing double-digit annual gains.
How distant that era seems now.
Investors today are contemplating a financial world in which most assets, from emerging-market equities to junk bonds to commodities, are at lofty levels compared with any long-term measures.
Sure, the global economy is booming. Sure, earnings are at record levels. Sure, economic conditions look excellent. But the housing market meltdown is a timely reminder that none of that is going to matter if you simply pay too much for an asset in the first place.Shares of KB Home, for example, touched a peak of $84.20 a share on July 20, 2005. The homebuilder saw its sales double in just three years while its share price more than tripled. In June of that year, the company announced that quarterly earnings soared 67%, and it raised its guidance for the full year. Yes, some people at the time were pointing out that it was all a massive bubble. They were even saying house prices were wildly overvalued and that in large parts of the country -- especially places like the Southwest, where land was plentiful and cheap -- they were bound to collapse. Not so Karatz. In June 2005, as his company announced record earnings, he upgraded full-year forecasts and insisted to analysts on the conference call that the future looked bright. "It was a terrific first half," he said. "Our outlook for the year if favorable."
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV