This morning Toll Brothers Inc. lowered its estimate for homes delivered in 2006 as a result of a tougher regulatory environment, community-opening delays and softening demand in some markets. If you’re bullish, you’ll look at this morning’s announcement by Toll Brothers (TOL) as an indication that the Fed has popped the housing bubble and can now stop raising rates. That would send the market higher as the Fed’s inflation jawboning and continued rate hikes have kept a lid on the market.
If you’re bearish, you probably believe the Fed will continue with its rate increases and the weakness in homebuilding will start to trickle into the rest of the economy. According some bloggers and economists, homebuilding has been proping up the overall economy – without it, employment and wage growth would still be stagnant.
So the ball is really in Ben Bernake’s court right now. For the bulls sake, I hope he lives up to his easy money reputation. Otherwise, the housing sector and the rest of the econonmy could experience a serious slowdown next year.
And if you’re still short the homebuilders, I would consider covering some on today’s TOL announcement.
