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Home builders boosted by Fed and home starts, but long-term problems seen

  • Home builders enjoyed a double boost today from the Fed's decision to maintain QE and keep interest rates low plus a report of resilient construction of single-family homes in August, but the Fed’s action simply kicks the can on a reduction of the bond-buying program and a subsequent increase in rates.
  • ISI Group thinks the move doesn’t bode well in the long term for home builders: "It speaks of prolonged economic weakness that ultimately may negatively affect the builders if job growth continues its puny pace."
  • But investors today were enjoying the short term, hoping a halt or slight reversal in the rise in rates will help spark home sales: BZH +4.4%, CVCO +4.8%, DHI +6.9%, HOV +5.3%, KBH +8.2%, LEN +6.5%, MDC +5.2%, MHO +5%, MTH +6.8%, NVR +3.9%, PHM +5.4%, RYL +8.7%, SPF +4.4%, TOL +5.1%.
  • ETFs: XHB, ITB, PKB.
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