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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.
Tue, Dec. 23, 10:15 AM
- November new home sales at a seasonally adjusted annual rate of 438K were off 1.6% from the previous month, and also lower by 1.6% from a year ago.
- A longer-term chart shows the current amount of new home sales to be at a level associated with the bottom of the deep recession of the early 1990s. There's also a pretty wide divergence between the confidence level of homebuilders (surging upward) and the path of new home sales.
- ITB +0.7%, XHB +0.9% on today's session.
- Previously: New home sales disappoint in November (Dec. 23)
- Full report
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, Dec. 8, 12:53 PM
- “There is a group of millennials that are waiting out there to jump into the market that do have the ability to repay,” say FHFA officials on a call announcing official approval of 97% LTV mortgages.
- Fannie Mae (OTCQB:FNMA -2%), which has more experience with the program, is already accepting applications, but Freddie Mac (OTCQB:FMCC -2.1%) - newer to the product - is waiting until late March for full implementation.
- Homebuilder ETFs: XHB, ITB
Wed, Nov. 19, 8:57 AM
- Single-family starts in October of 696K (the highest pace since Nov. 2013) were up 4.2% from September, while far-more-volatile multi-family starts fell 15.5%.
- Overall housing starts 1.01M were up 7.8% from a year ago.
- Full report
- Home construction ETFs: ITB, XHB
- Previously: Housing starts fall 2.8% in October
Tue, Nov. 18, 3:56 PM
- The IPO market remains hot - 344 companies have filed to go public so far this year, the most in a decade - but not so for homebuilders. After eight builders raised $1.77B issuing new shares in 2013 and 2014's first half - the first IPOs since 2004 - the momentum has faded as the pace of new home sales remains sluggish.
- “The public equity market right now is not an attractive place,” says Utah-based Woodside Homes chief Joel Shine. His company filed for an IPO in March, but instead decided to raise capital from existing investors and by issuing $50M of debt. The company in H1 posted sales roughly flat with that of a year ago.
- Of the eight builder stocks gone public sine 2013, five - TPH, CCS, WLH, UCP, TMHC - now trade for less than their IPO prices, while two - NWHM, WCIC - are modestly higher. Only one - LGI Homes (NASDAQ:LGIH) - has significantly outperformed the S&P 500.
- ETFs: ITB, XHB
Tue, Nov. 18, 10:13 AM
- “Growing confidence among consumers is what’s fueling this optimism among builders,” says NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, DE. “Members in many areas of the country continue to see increasing buyer traffic and signed contracts.”
- This month''s read of 58 is four points higher than October, and three points better than consensus estimates.
- The index of current sales conditions rose five points to 62, while the index for futures sales gained two points to 66. An index gauging prospective buyer traffic added four points to 45.
- ITB +0.5%, XHB +0.6%
- Previously: NAHB Housing Market Index
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, Oct. 29, 8:52 AM
- The share of occupied homes in which homeowners live fell nearly a full percentage point over the last year to 64.4%, says the Census Bureau, the smallest ratio since 1994. Alongside that number, naturally, the share of rentals that are vacant fell to its lowest since the mid-90s.
- The story is a familiar one: Tight lending conditions and an anemic recovery coming alongside rising prices for entry level homes as institutional investors gobble up the available supply.
- Homebuilder ETFs: ITB, XHB
Tue, Oct. 28, 9:52 AM
- "There is a chance of home prices going negative," Robert Shiller tells CNBC after the Case-Shiller 20-city composite index rose just 5.6% Y/Y in August, down from 6.7% in July.
- On a monthly basis, prices increased 0.2%, well shy of expectations for 0.5%, and 0.6% a month previous. Leading the slowdown is the Sun Belt which reported its worst annual returns since 2012.
- "In housing, boring is better," says Zillow's Stan Humphries. Cooling price appreciation and more inline inventory will give buyers a hand up after several years of sellers being in the driver's seat.
- ITB +0.5%, XHB +0.3%
Fri, Oct. 24, 10:25 AM
- September new home sales at a seasonally adjusted annualized rate of 467K were 0.2% above August's 466K (revised from 504K), and 17% above the level of a year ago.
- Inventory stands at 5.3 months of supply at the current sales pace vs. 5.5 months one year ago.
- On a monthly basis, sales jumped 12.3% in the Midwest, rose 2% in the South, were flat in the East, and fell 8.9% in the West.
- Full report
- ITB -0.6%, XHB -0.4%
Thu, Oct. 23, 5:18 PM
- "Many builders indicated that they were having a more difficult time filling positions compared to one year earlier," says the Atlanta Fed in its Construction and Real Estate Survey. "A shortage of labor was noted across many trades, including masons, drywall hangers, framers, electricians, and plumbers."
- The diffusion index on construction activity and the 90-day outlook fell to its lowest level since about the start of 2012 as a growing number of builders report activity as flat to slightly down.
- As for buyer traffic, the report from brokers and builders was mixed, with those indicating a decline suggesting seasonal factors and a drop in buyer confidence as being the main factors behind the dip.
- Homebuilder ETFs: ITB, XHB
Wed, Oct. 22, 3:53 PM
- While the MBA mortgage application index jumped 11.6% in the week ended October 17, it was a 23.3% surge in refinances leading the way. Purchase applications actually fell 4.6%, are now 9% lower than year-ago levels, and last week made up just 35% of total applications - this despite significantly lower mortgage rates.
- What it suggests is - for now - lower rates aren't luring homebuyers.
- Homebuilder ETFs: ITB -0.4%, XHB -0.9%.
- Previously: Refinancing leads jump in mortgage applications
Tue, Oct. 21, 10:45 AM
- September existing-home sales of 5.17M (at a seasonally adjusted annualized rate) is up from 5.05M in August, and marks the fastest pace this year, but 1.7% below the level of September 2013.
- The median existing-home price for all housing types of $209.7K is up 5.6% Y/Y.
- Total housing inventory of 2.3M homes is off 1.3% and represents a 5.3-month supply at the current sales pace. Inventory is up 6% Y/Y.
- All cash sales were 24% of all transactions vs. 33% one year ago. Individual investors purchased 14% of homes vs. 19% last year.
- First-time buyers remain at just 29% off all buyers - they've represented less than 30% of all buyers for the 17th month in the last 18.
- Full report
- ITB +1.6%, XHB +1.8%
Fri, Oct. 17, 10:06 AM
- September housing starts at a seasonally-adjusted rate of 1.017M were 6.3% higher than August and 17.8% higher than a year ago, with single-family starts up just 1.1% from August and volatile multi-family starts up a big 18.5%.
- Building permits rose 1.5%, with single-family permits down 0.5% and multi-family up 7%.
- Full report
- Homebuilder ETFs: ITB +1.1%, XHB +1%
- Previously: Housing Starts rise in September
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. 24, 10:12 AM| Comment!
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