This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

RealMoney Extra: Be Cautious With Builders

This column was published earlier this week on RealMoney. Click here for a free trial and stay up-to-date on the latest analysis and trends.

I am going to make a bold forecast: Existing-home sales are likely to increase each and every month from now through August.

But don't run out and buy Hovnanian (HOV), Ryland (RYL) and KB Home (KBH), or any other homebuilders just yet. (We do not have any positions at the moment, but we have been pretty actively trading the group.)

The kicker is, these monthly sales gains are absolutely, utterly meaningless. It is not, as some people have mistakenly written, signs of an improving housing sector. Rather, it merely reflects the regular seasonality of home sales.

Hunting Through the Data

I spend a lot of my day digging through data. I try to tease out what I can learn about a given economic sector by dissecting the official data releases, be they governmental or private sector in origin. I believe it's important to understand both what the reality is, as well as what most traders and fund managers believe.

Sometimes, the search is a bust, and the data is exactly what it appears to be. Often, I learn some detail that provides context to the news, allowing me to better understand what is going on economically. On occasion, we learn things about the true state of an aspect of the economy that is quite different than the popular headline. And just sometimes, these "seek and destroy" missions yield a very positive result that is completely at odds with the public perception.

The monthly existing-home sales was just such an economic indicator.

In mid-March, the headlines were quite optimistic: We learned from the National Association of Realtors that "Sales of existing homes increased in February and remain within a fairly stable range." And, we also learned that low prices have attracted buyers back into the market. The Wall Street Journal even had a front-page article, stating, "New data suggested that [foreclosure] pressures are starting to drive prices low enough to attract some buyers back into the market. Sales of previously occupied homes jumped 2.9% in February from the month before, the National Association of Realtors said, the first increase since July."

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • 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 Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,262.56 +89.32 0.55%
S&P 500 1,842.98 +12.37 0.68%
NASDAQ 4,034.1610 +11.4670 0.29%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs