Bill Tancer, analyst with Internet audience data firm Hitwise, pointed out something fascinating after the National Association of Realtors [NAR] released figures for July existing home sales. He noticed that there's a reasonable correlation between the number of U.S. Internet searches for the term "homes for sale" and the NAR's existing home sales data.
But what makes this correlation potentially actionable from an investment perspective is the timing.
The NAR publishes its data with a lag. The August existing home sales data, for example, will be announced by the NAR on September 25th. But data on the popularity of "homes for sale" are available immediately, so tracking searches provides an advanced indicator of the NAR's data announcement.
Now take a look at the chart:
The number of "homes for sale" searches ticked up noticably in July, suggesting that the NAR's August data will show a marked improvement in the housing market. (The full Hitwise article is here.)
Perhaps this means it's time to buy the homebuilder stocks, at least for a trade. Sentiment on the homebuilder stocks is still strongly negative. But the SPDR Homebuilders ETF (NYSEARCA:XHB) ticked up recently, and individual homebuilder stocks such as Toll Brothers (NYSE:TOL) seem to have bottomed.
If this is indeed the time to buy, which stocks to choose? In addition to Toll Brothers, the homebuilder stocks include Beazer Homes USA, Inc. (NYSE:BZH), Centex Corporation (CTX), DR Horton (NYSE:DHI), KB Home (NYSE:KBH), Lennar Corp. (NYSE:LEN), Pulte Homes, Inc. (NYSE:PHM) and The Ryland Group, Inc. (NYSE:RYL). Opinion and analysis of these stocks and the housing sector in general is here.
An easy approach is to follow Bill Miller, market-beating manager of the Legg Mason Value Trust. He's been buying homebuilder stocks, and his fund held 3.92% of its assets in housing stocks as of June 30th. His holdings are here.
Full disclosure: no position in any of the stocks or ETFs mentioned here at the time of writing.