With the S&P’s closing near where they were just before the awful home sale figure was released, the action is a clear message that the market knows the housing data before and after the tax credit deadline is completely distorted and thus a worthless take on the state of the market. We know things are soft but the measurement of that extent is still cloudy because of the amount of demand that the tax credit pulled forward and the subsequent hangover. Yes the home building and related stocks are trading well today having priced in the bad state of things for now in terms of activity and ignoring the Existing Home Sale # but the BKX index has broken to the lowest since the first day of trading 2010 and maybe is reflecting the new reality that home prices (collateral backing a lot of still large bank exposure) are about to take another leg down after the Spring bounce.
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