That is the story of every real estate sales person and talking head on TV financial programs.

Is it true?

Let’s examine the facts. Everyone knows: 1. New home starts in January dropped more than 14%. (This is one of the most important statistics as this is where it all begins.) 2. Home construction is almost 38% below a year ago. 3. Cancellation of previously sold homes is running more than 20%. (People are walking away from contracts and leaving money on the table.) 4. Vacant homes in 2006 have increased 36% to more than 2 million and this does not count homes that are temporarily rented by investor-speculators who want to sell them. 5. Inventories are continuing to rise. 6. Length of time on the market is increasing. 7.Home builders are letting options expire on land they had expected to build on, selling off other parcels and even selling heavy construction equipment.

More than 20 sub-prime lenders have gone out of business or declared bankruptcy. The junk bundles of high interest mortgages they were selling is even affecting the big Wall Street institutions such as Merrill Lynch, HSBC, and JP Morgan. They should have known better, but greed blinds even the smartest.

The truth hurts, but keep going if you want to know.

So much for fundamentals. Now look at the technical analysis of home builder stocks. The rally that started a few months ago in anticipation of the return of the housing boom seems to be fading. Of the 10 major home builder stocks only one has a positive chart pattern. In the others the on balance volume statistics are neutral to bearish. Volume of trading picks up on the down side. There are other technical indicators that are negative.

The housing boom has created between 300,000 to 500,000 jobs. Builders haven’t laid off many yet as they are finishing out current projects and selling at almost any price to move that inventory. If and when builders start downsizing it could affect our entire economy.

Those jobs represent about 30% of spendable income. It is money that keeps the economy going. Each construction job has a direct or indirect affect on 6 businesses. Not just kitchen cabinets and furniture, but the local 7-11 and Wal-Mart and others.

Is this a good time to buy a house? Looking at the numbers above it shows a buyer’s market. Speculators are trying to get out at any price. Every realtor will say that Spring brings out the buyers. Are there enough to work off these inventories? Only time will tell. As long as the economy is doing well it will take time to see how this plays out.

Statistics are just numbers and don’t mean anything unless the observer acts upon them.

Over the next 20 years it will be interesting to see what happens to the value of our dollars.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know. Copyright 2006 All rights reserved.

Copyright 2007 Albert W. Thomas All rights reserved. Author of "IF IT DOESN'T GO UP, DON'T BUY IT!"