High Homebuilder Confidence Marks The Top

Although I never put much credibility in the Government’s housing starts report because the data collection is poor and the data that is collected is put through the Government’s statistics manipulation meat-grinder, today showed a stunning decline in housing starts vs. last month and vs. expectations.  The high volatility last month and this month was due to “reported” starts in apartment buildings.  The last time apartment starts reached a very high level was in 2005 – right before the housing bubble burst.
And yesterday much ado was made about the National Association of Homebuilders Confidence Index report.  It’s reached a level not seen since, well – 2005.  I put together this graphic below which happens to show what happens to housing starts and new home sales when homebuilder “confidence” spikes up like it showed in yesterday’s report (click on graph to enlarge):

As you can see, the last several times builder confidence spiked up, housing starts and new home sales fell off a cliff (2005, 1994 and 1990).  I remember the 1990′s housing market well because I was trading homebuilder junk bonds on Wall Street.  All of them were the junk bonds of the same homebuilders around today who nearly went bust in the late 1980′s and in 2008. (more)
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