You know the rest, "Where the Buffalo roam", (new verse) "Because I cannot afford a house anymore". Today, Fannie Mae said that the price of homes financed by the mortgage giant rose to a 16.5% annualized rate in the second quarter and are now up 14.1% year-over-year. Even with low borrowing costs, consumers are finding it less expensive to rent than buy.
As is the case with most bubbles, there is a self correcting mechanism. Today, the homebuilder stocks continued to sell-off despite data that showed there is no slowdown in home sales or mortgage applications. The Housing Index (HGX) is down 2.15% today after a fall of 3.2% on Friday.
Oil prices continue to spike as refinery problems continue to cause concerns about refined supplies. The 10-year Treasury note was down 2/32 to yield 4.40%.
While many influential traders are still on vacation at places like Marthaç—´ Vineyard, the Hamptons and the Jersey shores, we will remain on the sidelines for a little while longer with one exception. We are going back on the buyside with Bank of America (BAC Buy Limit $43). BAC is now yielding an amazing 4.6%. Buy it and tuck it away. Once the Fed stops raising rates, the financials will come roaring back.
As far as Real Estate is concerned, if you want to lose money very rapidly, go buy a condo in Florida on the beach. The only cheap spots in the country are where the "Buffalo Roam".
