Home building stocks are falling

Prior to the 2008 recession, home building stocks took the nose dive first, in 2005 & 2006.

Then they fell off cliffs in 2007 & 2008.

Now home building stocks are falling, all below the 200d ma, stage 4.

This isn't 2008 but something to watch.

 

U.S. bank, housing stock divide looks short-lived to BofA

Record-setting gains for shares of U.S. homebuilders are at odds with weakness in bank stocks, according to Michael Hartnett, Bank of America Corp.’s chief global investment strategist. Hartnett compared S&P 500 indexes for the builders and lenders in a report Friday. The housing index climbed 38% for the year through Friday and ended last week at a record, according to data compiled by Bloomberg. The bank index, by contrast, fell 33%. Based on the groups’ historical tendency to move in tandem, Hartnett wrote this about the outlook: “Either housing buckles or banks play catch-up.”

Homebuilders reap benefit of cheapest-ever U.S. mortgages

Homebuilders are among this year’s best-performing U.S. stocks, and record-low mortgage rates have contributed to the industry’s strength. The S&P 1500 Homebuilders Index ended last week with a year-to-date gain of 27%, according to data compiled by Bloomberg. The group ranked 11th of 147 industries in the S&P Composite 1500, tracking components of the S&P 500 and smaller-company indexes. As the builders rose, the average rate on 30-year fixed mortgages fell as much as 0.88 percentage point to a record low 2.86%, according to Freddie Mac. Last week’s average was 2.87%.

 

Rate addiction clouds U.S. homebuilding stocks' outlook

Shares of homebuilders will have to break unusually close ties to interest rates to move higher, according to Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC. Dutta cited the relationship between S&P’s broadest index of U.S. builders and the yield on 10-year Treasury notes in an email Monday. 

 The one-year correlation between them since late September has been about minus 0.9, the most negative reading since 2001, according to data compiled by Bloomberg. The indicator shows homebuilding stocks have kept pace with lower interest rates more than usual, and vice versa.

U.S. homebuilders seen as bargains at recession-level P/Es

Shares of U.S. homebuilders “look interesting” because they are already priced for recession, David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates Inc., wrote in a report Monday. The S&P Composite 1500 Homebuilding Index was valued at 8.8 times earnings on Monday, according to data compiled by Bloomberg. The price-earnings ratio was the fifth lowest of 148 industry groups in the Composite 1500, which combines the S&P 500 and two smaller-company indexes. Last month, the P/E slid to 7.9 -- the lowest since September 2007, three months before the last recession started.

 

Rates send U.S. housing, auto stocks into bear market

Shares of U.S. homebuilders and automakers are “over their skis” as a result of higher interest rates, according to Josh Brown, Ritholtz Wealth Management LLC’s chief executive officer. Brown cited the industries in a post Monday on his blog, the Reformed Broker. Bear markets in both groups began after the S&P Composite 1500 Index, combining the S&P 500, MidCap 400 and SmallCap 600 indexes, peaked Jan. 26. The composite’s housing index fell 37 percent from that date through Monday and its auto gauge lost 29 percent.

Homebuilder Stocks

Homebuilding stocks
Company name Mkt Cap▼

• Lennar Corp (LEN) – largest U.S. homebuilder – 20.58B
• DR Horton (DHI) – 17.503B
• NVR Corp (NVR) – 11.674B
• Pulte Homes (PHM) –  8.817B
• Toll Brothers (TOL) –  6.774B
• Taylor Morrison Home (TMHC) –  2.722B
• KB Home (KBH) – 2.604B
• Meritage Homes (MTH) –  1.916B
• LGI Homes (LGIH) – 1.652B
• William Lyon Homes (WLH) –  1.148B
• M/I Homes (MHO) –  978.561M
• Beazer Homes (BZH) –  555.06M
• Hovnanian (HOV) – 250.695M
• Comstock (CHCI)
• MDC (MDC)
• TRI Pointe Group (TPH)
• ++Cavco Industries (CVCO)
• ++BLDR
• Standard Pacific (SPF) – merged with Ryland Group (RYL) (Aug. 2015) and then acquired by Lennar Corp (LEN) (Oct. 2017)
• Ryland Group (RYL) – merged with Standard Pacific (SPF) (Aug. 2015) and then acquired by Lennar Corp (LEN) (Oct. 2017)

Homebuilding ETFs

• iShares U.S. Home Construction (ITB)
• SPDR S&P Homebuilders ETF (XHB)
• Direxion Daily Homebuilders & Supplies Bull 3X Shares (NAIL)

Home improvement retailers

• Home Depot (HD)
• Lowe's (LOW)

 

Homebuilder Charts: (day's change) (change from open) (by vol)

         

Houses Surpass Gold for Hedging U.S. Inflation

Anyone seeking protection against a pickup in U.S. inflation would be better off buying houses than

gold, according to Michael Hartnett, chief investment strategist at Bank of America Corp.’s Merrill Lynch unit.

     

 

U.S. house-price index, compiled quarterly by the Federal Housing Finance Agency, and the price of the precious metal since 1995. 

     The dollar’s buying power is poised to decline, Hartnett wrote, as the Federal Reserve seeks to bolster economic growth through bond purchases, or so-called quantitative easing. Fed policy makers raised the prospect this week that the pace of buying may increase from the current $85 billion a month.

     “No one knows if the QE experiment will ultimately prove to be successful,” the New York-based strategist wrote. “But we do know the ’journey’ involves asset-price inflation. With the outlook for gold looking more muted, U.S. real estate looks the best hedge.”

     Home prices rose 6 percent through the end of last year from their low in the second quarter of 2011, according to the agency’s index. The first-quarter reading is due May 23. Prices in 20 of the largest U.S. cities increased 0.4 percent through the first two months of this year, according to the Standard &

Poor’s/Case-Shiller index.

     As houses became more expensive, gold got cheaper. The precious metal’s price declined as much as 31 percent on New York’s Comex from its peak of $1,923.70 an ounce, reached in September 2011.

Buffett’s Berkshire seen as best housing pick

 Warren Buffett’s Berkshire Hathaway Inc. is the best investment for anyone seeking to benefit from a

housing-market rebound, according to Joshua Brown, a vice president at Fusion Analytics Research Partners LLC.

     

     Class B shares have risen 30 percent from last year’s low,  set on Sept. 22. The shares are 3.1 percent away from the highest price since October 2008, before the financial crisis reduced the value of equity investments and derivative contracts owned by Berkshire.

It’s got the safety of a well-diversified business and it hits the housing market from virtually every angle. The Omaha, Nebraska-based company owns insurers, a food distributor, a railroad and a utility, among other units.

     Berkshire’s holdings in Wells Fargo & Co., the largest U.S. mortgage lender, and other banks are among the investments that stand to benefit from a homebuilding recovery.

Buffett’s company owns a more than $13 billion stake in Wells Fargo, second to Coca-Cola Co. among its largest holdings.

     Several Berkshire units are also poised to gain. Benjamin Moore & Co., a paint maker; Johns Manville, a maker of insulation and roofing materials; and Shaw Industries Group Inc., a carpet producer, are among them. They are part of a group that generated 17 percent of first-quarter revenue.