Summary: The Homebuilder’s confidence index has fallen to levels not seen since the early 1990’s. Mortgage applications to purchase a new home are falling at a high-teens percentage rate, California homes look like a classic bubble, and homebuilder shares are rallying.

PPI data was mixed for capital goods makers. Aircraft engines are getting more expensive.

As are industrial valves.

But construction equipment may be turning down (last chart).

Watch List news:
Homebuilder and mortgage banker NVR Inc. (NVR - Annual report) acknowledged the slowing housing market. Second-quarter profit rose 14 percent year-over-year but gross margins weakened, land values were written down and cancellations increased. For the quarter ended March 31, net income climbed to $190.4 million, or $28.08 per share, from $167.6 million, or $21.42 per share, last year. Consolidated revenue rose to $1.75 billion from $1.28 billion in the year-earlier period. NVR shares rose $31.15, or 7.2 percent, to $466.15 on the news, because, well, it doesn’t take much to get a 4x P/E stock moving. More »