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A Convergence Of Positive Momentum Continues Its (Quiet) March For Home Builders
- The iShares US Home Construction ETF is approaching a critical test of post-recession highs.
- Stock action, short interest, and housing data are all converging on what looks like an imminent breakout. The slow and quiet pace of these catalysts support a sustained move.
- A major analyst upgrade in the sector seemed to confirm as well as support the building momentum.
- New home sales hit a fresh post-recession high in September.
- Major revision downward of August sales still preserves the overall uptrend from the post-recession lows.
- This month's notably large move occurred in the under $150K segment of sales. The share of all sales in this segment had been trending downward for 2 years.
- The reaction to the data from iShares US Home Construction provides a potential sign that 2014's downtrend is finally reaching an end.
Tying Together Housing Sentiment, Starts, Sales, And Investment With iShares U.S. Home Construction
- August home builder sentiment surged to new post-recession highs.
- Housing starts continue positive year-over-year growth.
- This week, looking to new home sales and especially private residential fixed investment to confirm that iShares US Home Construction is overdue for a snapback rally.
- July single-family new home sales print within recent range.
- Regional performance varied widely from a sinking Northeast to a strong South.
- Months of inventory has reached "balance" for the first time since the post-recession housing bottom.
- I am assuming home builders will slowly ramp production back down under current conditions and margins are likely capped for now (in aggregate).
The iShares U.S. Home Construction ETF Now Lags Encouraging Housing Data
- Defying June's bearishness, July housing starts surge to impressive post-recession levels.
- Regional performance is still volatile, underlining importance of looking past headline numbers for key drivers.
- The iShares US Home Construction ETF has not only responded with gains in the wake of good housing news, but it also has held these gains so far.
- Strong existing home sales numbers are reaching post-recession highs and adding to encouraging housing picture.
- Affordability and the prospect of higher rates remain important caveats.
No Need For Alarm Over Housing Starts Even As They Clash With Bullish Builder Sentiment
- iShares US Home Construction continues to get buffeted by a healthy mix of bullish and bearish indicators in the housing market.
- A recovery in home builder sentiment suggests that disappointing housing starts are more likely indicative of an on-going "bumping along" for the housing market.
- The Southern region greatly distorted the May to June housing start numbers just as it has throughout the housing recovery.
- Year-over-year changes in single-family housing starts are showing extremes in volatility that should further temper efforts to draw definitive conclusions.
- Home builder sentiment jumps in June and seems to confirm overall stabilization.
- 2014 is the third year in a row sentiment makes a spring recovery after a sharp drop in March.
- Sentiment remains supportive of investments in iShares US Home Construction.
Growing Stalemate: Housing Starts, Affordability And Sentiment Vs. Student Debt
- There are encouraging signs from strong April housing starts and forward-looking builder sentiment.
- Affordability increasing again, with cooling housing prices, lower rates, and rising median incomes.
- Potentially growing stalemate, as burden of student debt looming as next headwind for household formation.
- Overall, risks are to the upside, and warrant close monitoring of the iShares U.S. Home Construction ETF.
Residential Employment Plows Ahead As Housing Indicators Stabilize
- Residential employment prints 31st straight month of year-over-year growth.
- The Housing Market Index has stabilized the last 2 months with signs of life in April.
- Short interest in the iShares US Home Construction plunges to 9-month lows.
- Signs are adding up to a slightly more encouraging outlook for home builders.
Riding The U.S. Housing Recovery On The Back Of iShares U.S. Home Construction ETF
- Employment and mortgage rates are two most important drivers for housing recovery.
- Employment is recovering and QE exit has been fully priced in current mortgage rate.
- Fundamentals to support an organic housing recovery are in place.
- Recent ITB price correction presents a good buying opportunity.
Continued Momentum In Residential Construction Employment Doesn't Stop Slide In Home Builder Shares
- Employment in residential construction remains strong.
- ITB continues its dip anyway as TLT also takes a tumble and downgrades follow.
- Reversal in short interest could be confirming ITB's breakout.
There are no Transcripts on ITB.
Wed, Dec. 10, 3:53 PM
- "Why 2014 was a pause and flat to 2013 and not improving has been a bit puzzling," says Toll Brothers (TOL -7.6%) management on the earnings call.
- Asked about the impact of tumbling energy prices on markets like Dallas and Houston, management says the company's exposure there is small, with Houston accounting for 3.7% of signed contracts.
- Overall, Toll expects the housing recovery to be "bumpy," and that demand will truly return when buyers no longer fear price drops.
- Previously: Toll Brothers slips on FQ4 miss (Dec. 10, 2014)
- It's a different story (at least for the stock price) with Hovanian (HOV +5.9%) after its earning report today. Management: "It's an understatement to say that the past 12 months have been choppy ... Given the gains we've seen in employment, we would have expected stronger home sales."
- Previously: Hovnanian pops as fiscal 2015 starts off strong (Dec. 10, 2014)
- Other builders today: Ryland (RYL -5.1%), Lennar (LEN -5.3%), Beazer (BZH -5.1%), Pulte (PHM -3.5%), KB Home (KBH -5.1%).
- ETFs: ITB -3.4%, XHB -2.5%
Mon, Nov. 10, 10:08 AM
- Releasing preliminary FQ4 results ahead of a conference presentation, Toll Brothers reported sizable year-over-year sales gains both in terms of units and dollars. The ASP of homes delivered of $747K was up 6.3% from a year ago. The ASP of signed contracts in FQ4 of $757K was up 5%.
- PulteGroup (PHM +2.6%) is also benefitting from an upgrade to Buy at BofA. Others: Lennar (LEN +2.7%), D.R. Horton (DHI +2.1%), Ryland (RYL +3.1%), Hovnanian (HOV +3.4%), KB Home (KBH +3.1%).
- ETFs: ITB, XHB
Wed, Sep. 24, 10:25 AM
- Bond prices are mostly snoozing through the August New Home Sales report showing sales of single-family homes surging 18% to a six-year high of 504K (seasonally adjusted annual rate). Expectations had been for a pace of 426K. The 504K print is 33% higher than August one year ago.
- Also ignoring the volatile number and instead focusing on weak results from KB Home, the ITB is lower by 0.8%.
- The 10-year Treasury yield has actually dropped nearly two basis points since the print, now flat on the session at 2.53%. TLT flat.
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, SBND, TLH, DLBS, VGLT, UBT, TLO, TENZ, LBND, TYBS, DLBL
Wed, Sep. 17, 10:50 AM
- “Since early summer, builders in many markets across the nation have been reporting that buyer interest and traffic have picked up," says NAHB Chairman Kevin Kelly. On the other hand, says NAHB Chief Economist David Crowe, "We are still not seeing much activity from first-time homebuyers."
- This month's increase in the headline Housing Market Index to 59 was the fourth straight gain, and brought the level to its highest since November 2005.
- ITB +3%, XHB +1.8%
- Previously: Homebuilders party after Lennar results
Wed, Sep. 17, 10:04 AM
- Lennar's sizable earnings beat included a 23% gain in new orders - a strong result given the slowdown seen from some other builders.
- Previously: Lennar up 4.3% after reporting big quarter
- ETFs: ITB +2.6%, XHB +1.8%
- Individual players: Ryland (RYL +4.8%) Pulte (PHM +3.8%), Toll Bros. (TOL +3.2%), D.R. Horton (DHI +4%), Hovnanian (HOV +5.8%), KB Home (KBH +4.4%), Comstock (CHCI +4.2%), Standard Pacific (SPF +3.8%).
Wed, Sep. 3, 10:16 AM
- The homebuilders are lower in early action following Toll Brothers beating earnings estimates, but expressing caution on pricing power, and cutting guidance for full-year home deliveries.
- ITB -0.8%, XHB -0.5%.
- Individual names: Hovnanian (HOV -0.9%), Lennar (LEN -1.5%), KB Home (KBH -1.8%), PulteGroup (PHM -1.4%), D.R. Horton (DHI -1.1%), Ryland (RYL -1.5%), NVR (NVR -1.1%), Standard Pacific (SPF -1.1%).
Tue, Aug. 19, 8:38 AM
- Housing starts in July of 1.093M were 15.7% above the revised June estimate of 945K and 21.7 above the year-ago level. Single-family starts of 656K were 8.3% above June's revised level of 606K.
- Building permits of 1.052M were up 8.1% M/M and 7.7% Y/Y. Single-family permits of 640K gained 0.9% from June.
- Full report
- The homebuilder ETFs are on the move, with ITB +1.3% and XHB +1.6% premarket.
Mon, Aug. 18, 10:14 AM
- "Builders are seeing a noticeable increase in the number of serious buyers entering the market,” says NAHB Chairman Kevin Kelly, after his firm's Housing Market Index rises to 55 this month. Challenges still remain, he adds, noting tight credit, and shortages of finished lots and labor.
- The HMI's three sub-components all rose in August, with the current sales conditions and expectations for future sales gauges each ahead by two points to 58 and 65, respectively. The gauge of traffic for prospective buyers added three points to 42.
- ITB +1.8%, XHB +1.6%
Thu, Jul. 24, 10:09 AM
- The ITB is lower by 1.5% and the XHB by 0.7% with earlier earnings misses from Pulte (PHM -1.5%) and D.R. Horton (DHI -5%). and just-released disappointing new home sales data weighing. Also reporting this morning was M/I Homes (MHO -3.2%), and that company beat estimates.
- June single-family new home sales of 406K fell 8.1% from May's rate of 442K (which was revised down from 504K). Expectations for June sales were 479K.
- The supply of new homes rises to 5.8 months at June's sales pace from 5.2 months previously.
- Other names: Lennar (LEN -1.6%), Ryland (RYL -2.3%), Standard Pacific (SPF -2%), Hovnanian (HOV -0.9%), Toll Brothers (TOL -2.2%).
Mon, Jun. 30, 10:12 AM
- May's NAR Pending Home Sales Index of 103.9 is up 6.1% from April. but 5.2% below the level of a year ago. The 6.1% sequential increase is the fastest gain since April 2010 when it jumped 9.6% ahead of the expiration of a tax credit program.
- The NAR's Larry Yun expects a quickening pace of sales in H2, but not enough to offset the sluggish first half of the year, with affordability and access to credit remaining key issues.
- ITB +0.9%, XHB +0.8%
- Full report
Tue, Jun. 24, 10:09 AM
- May's adjusted annual pace of 504K new home sales is the fastest print in six years. The number is 18.6% above April's pace and 16.9% higher than a year ago. The supply of new homes on the market at the current sales pace dropped to 4.5 months worth from 5.3 months in April.
- Sales in the Northeast jumped to 34K from 22K in April, and those in the West to 130K from 97K.
- Full report
- Homebuilder ETFs: ITB +1.2%, XHB +0.7%.
- Toll Bros. (TOL +1.2%), Lennar (LEN +1.4%), D.R. Horton (DHI +1.7%), KB Home (KBH +1.7%), Hovnanian (HOV +1.3%), PulteGroup (PHM +1.3%)
- Previously: New home sales soar past estimates
Mon, Jun. 23, 10:13 AM
- Homebuilders (ITB +1%), (XHB +0.7%) are on the rise early after existing home sales rise 4.9% to a seasonally-adjusted rate of 4.89M in May, ahead of expectations for 4.75M.
- The 4.9% monthly gain was the fastest rise since August 2011, but the 4.89M pace is 5% lower than a year ago.
- The NAR's Larry Yun notes slower price growth thanks to rising inventory along with a downtick in mortgage rates as boosting business.
- Total housing inventory of 2.28M homes for sale is a 5.6 month supply at the current sales pace, down from 5.7 months in April, but 6% higher than a year ago.
- The median home price of $213.4K is 5.1% higher than a year ago. Distressed home sales of 11% falls from 18%.
- The percent of first-time homebuyers continues to disappoint, down to 27% in May from 29% in April and 29% a year before that.
- Full report
Fri, Jun. 20, 10:38 AM
- The averages are nudging higher, but not the homebuilder names after Owens Corning cuts 2014 guidance on continued weakness in its roofing business.
- Soft action in Q1 continued through April and May, says the company, which now sees H1 roofing volumes as much as 20% lower than 2013. Owens still expects H2 to be better, but is less confident of that forecast today than it was a few months ago.
- ETFs: ITB -1.3%, XHB -1.2%
- Toll Bros. (TOL -1.6%), TriPointe Homes (TPH -1.3%), Lennar (LEN -1.6%), Ryland (RYL -1.8%), Hovnanian (HOV -0.9%), PulteGroup (PHM -1.2%), D.R. Horton (DHI -0.8%), Standard Pacific (SPF -1.8%)
Tue, Jun. 17, 9:44 AM
- Hit particularly hard in early action are the homebuilders after May housing starts missed expectations, but a fast CPI print has interest rates higher.
- Previously: Treasury prices slip after fast CPI report
- ETFs: ITB -1.1%, XHB -0.7%
- D.R. Horton (DHI -2.3%), KB Home (KBH -1.3%), Ryland (RYL -1.1%), Toll Brothers (TOL -1.2%), Lennar (LEN -0.7%), Hovnanian (HOV -0.7%)
Wed, May. 28, 3:01 PM
- Jay McCanless and Annie Worthman at Sterne Agee say without the benefit of a lower tax rate other non-operating boosts, Toll Brothers (TOL +2.1%) would have missed the team's EPS estimate of $0.31 per share. They continue to rate the stock an Underperform with $28 price target.
- The bullish team at MKM Partners note Toll "essentially raised" guidance by boosting the low end of its average expected sale price this year to $690K from $675K. "Given the company’s long build cycle, we suspect that the higher guidance is likely more of a statement on the anticipated mix of closings rather than a signal that prices are being raised more aggressively."
- Amid the big gain by Toll and sharply lower interest rates, some other builders: Hovnanian (HOV +1.7%), Beazer Homes (BZH +1.4%), KB Home (KBH +0.8%), Lennar (LEN +0.2%), PulteGroup (PHM), D.R. Horton (DHI +1.2%).
- ETFs: XHB, ITB, PKB
- Previously: High home prices boost Toll results
- Previously: Toll Brothers beats by $0.09, beats on revenue
Fri, May. 23, 10:08 AM
- New single-family home sales of 433K in April were 6.4% above the revised March rate of 407K (originally reported as just 384K), but 4.2% lower than a year ago. The confidence (or lack thereof) level on any one month of reading is plus or minus 15.9%.
- The median sales price of $275.8K is down 1.3% Y/Y.
- The supply of homes on the market is 5.3 months at the current sales rate, down from 5.6 months in March.
- Full report
- ITB +1.1%, XHB +0.9%
ITB vs. ETF Alternatives
The iShares Dow Jones U.S. Home Construction Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Select Home Construction Index.
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