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PowerShares Dynamic Building & Construction Portfolio ETF (PKB)

  • Aug. 18, 2014, 4:07 PM
    • In its August forecast, Fannie Mae expects 2014 construction starts to hit 642K, down about 8% from the July prognostication. The outlook for single-family home sales is cut 11% to 431K.
    • 2015 bounce? Not so fast, says Fannie's chief economist Doug Duncan. While 2015 will be stronger than 2013 and 2014, it won't be the "breakout year" some are expecting.
    • Previously: Homebuilder confidence at highest since January
    • ETFs: XHB, ITB, PKB
    | Comment!
  • Jun. 10, 2014, 5:09 PM
    • One of the more remarkable charts in his slide deck, says Jeff Gundlach in a presentation titled "Penny For Your Thoughts, is a graph (slide 36) of the homebuilding stocks vs. the price of lumber. The homebuilders are hanging in there even as the lumber tumbles sharply.
    • While making it clear, he's not expecting any sort of housing collapse, Gundlach expects home prices to stop going up and the demand for homes to be quite a bit less than what many are expecting.
    • Webcast
    • ETFs: XHB, ITB, PKB
    | Comment!
  • Jun. 9, 2014, 12:58 PM
    • Those who say it is a good time to sell a house increased to 43%, a new all-time high, says Fannie Mae (FNMA -0.4%) in its May National Housing Survey. Those who say it's a good time to buy dipped a bit to 68%.
    • "Consumers’ lukewarm income expectations and reticence about the economy seem to be holding back housing demand," says Fannie chief economist Doug Duncan. "This year’s spring and summer home buying season has gotten off to a slow start, even as mortgage rates have trended lower over the past two months ... The rebound in home sales will likely be too modest to pull sales for all of 2014 ahead of last year."
    • Speaking to Duncan's remarks: Those who say their household income is significantly higher than a year ago fell four points to 21%.
    • Homebuilder ETFs: XHB, ITB, PKB
  • May 29, 2014, 10:09 AM
    • The Spring housing bounce hasn't quite arrived as Pending Home Sales only edged higher in April, the 0.4% gain falling short of estimates of 1%. On a Y/Y basis, the Pending Home Sales Index of 97.8 is lower by 9.2%.
    • Up nicely in opening action, the ITB gives back some of those gains, now ahead by 0.3%.
    • Full report
    • Other ETFs: XHB, PKB
    • Previously: Pending Home Sales rises 0.4%
  • May 28, 2014, 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
    | 1 Comment
  • May 22, 2014, 10:20 AM
    • April marks the first gain in existing home sales this year, according to the NAR, with the seasonally-adjusted annualized rate rising 1.3% to 4.65M. On a year-over-year basis existing home sales are down 6.8%, and the group's Lawrence Yun allows that annual home sales in 2014 will be lower than last year.
    • Housing inventory of 2.29M homes gained 16% in April and represents a 5.9 month supply at the current sales pace, up from 5.1 months in March.
    • The median price of $201,700 is up 5.2% Y/Y.
    • First-time buyers represent just 29% of all buyers (the same as a year ago), and all-cash sales made up 32% of all transactions (also flat Y/Y).
    • Regions: Northeast down 6.3% Y/Y to 600K, Midwest down 9.6% to 1.03M, South -3.5% to 1.94M, West -10% to 1.08M
    • Full report
    • ETFs: XHB, ITB, PKB
  • May 16, 2014, 8:46 AM
    • Overall housing starts of 1.072M were 13.2% higher than March's revised level of 947K and 26.4% above the one year ago level. Single-family starts of 649K edged up from March's level of 644K. Multi-family starts of 413K accounted for 39% of all starts - the highest level in about 40 years.
    • Overall building permits of 1.08M grew 8% from March and were 3.8% higher than a year ago. Single-family permits of 602K were essentially unchanged from March's 600K. Multi-family permits were 453K.
    • Full report
    • The 10-year Treasury yield briefly jumped a couple of basis points on the print, but is back to unchanged on the session at 2.50%.
    • ETFs: XHB, ITB, PKB
    • Previously: Housing Starts
  • May 8, 2014, 10:11 AM
    • The average rate for a 30-year fixed-rate mortgage drops to 4.21%, the lowest rate since November and down from 4.29% a week ago, according to Freddie Mac's latest weekly report.
    • The average rate for the 15-year fixed-rate mortgage falls to 3.32% from 3.38% in the prior week.
    • A year ago, the respective 30- and 15-year rates were 3.42% and 2.61%.
    • "Mortgage rates continued moving down following the decline in 10-year Treasury yields after a dismal report on real GDP growth in the first quarter," according to Freddie chief economist Frank Nothaft.
    • ETFs: XHB, ITB, PKB
    | Comment!
  • May 5, 2014, 12:57 PM
    • "Single-family housing is over-believed and overrated," says Jeff Gundlach at the Ira Sohn Conference. What strength there is or was in housing, he says, came from all-cash transactions (much of it institutional money). "This is not exactly indicative of the organic growth in the market from a real buyer’s perspective.”
    • New homes sales: "Remarkably weak ... flat on their back just as they were at the depths of the recession."
    • Affordability: If it's so great, why did last year's interest rate rise hit sales in such a large way?
    • Wind down of the GSEs: Who knows how this plays out, but it's almost certainly going to result in higher mortgage rates.
    • "The kids are not alright," he says, and the exit of first-time home buyers is a secular trend thanks to high unemployment and high student debt levels. "Young people were shocked and scarred by the financial crisis ... [renting is] massively  more appealing."
    • Related ETFs: XHB, ITB, PKB
    • Earlier Sohn coverage
  • Jan. 21, 2014, 1:34 PM
    • Both the iShares U.S. Home Construction ETF (ITB -0.4%) and the SPDR S&P Homebuilders ETF (XHB -0.2%) have plenty of liquidity and reasonable expenses, but differ in their definition of "homebuilding."
    • The ITB tracks companies making the materials for homes as well as those who build them - 65% in homebuilders and 15% on materials companies. Lennar and Toll Brothers top the holdings, each with more than 9% of AUM.
    • The XHB, on the other hand, has just 50% combined in homebuilders and materials companies, with 20% in retailers like Bed Bath & Beyond, Pier 1, and Lowe's. Another 15% is in furnishing companies like La-Z-Boy and Whirlpool.
    • Another difference; XHB is equal-weighted, meaning more exposure to small and mid-cap stocks. The market-weighted ITB's top 10 holdings make up 63% of its portfolio.
    • Loosely correlated might best describe the returns of the two. The XHB was up 25% in 2013 vs. 18% for ITB, while the ITB's 75% gain in 2012 came against 53% for XHB.
    • The PKB is another homebuilder ETF offering.
    | Comment!
  • Jan. 2, 2014, 11:09 AM
    • Despite concerns about interest rates continuing to rise, Sterne Agee's Jay McCanless says there will be more, not less mortgage financing available (makes sense as suppliers generally offer more product when prices rise). The timing, however, is uncertain, and McCanless is cautious about housing demand in Q1, but bullish for the full year - he expects 2014 order growth of 16.4%, 230 basis points higher than consensus.
    • What about the more rigid QM (qualified mortgage) rules? Originators are already - on average - underwriting to tighter standards than the new rules set for release by the CFPB on January 10, says McCanless.
    • He thinks D.R. Horton (DHI -2.4%) is particularly well-positioned to take advantage. "We believe the lack of open communities has hindered sales and unit order growth for several builders during 2013, and we estimate community count growth could resolve some of these issues."
    • Related ETFs: XHB, ITB, PKB
    | Comment!
  • Nov. 20, 2013, 10:13 AM
    • Existing home sales of a seasonally adjusted 5.12M fell 3.2% in October (roughly inline), but are 6% higher than a year ago. The national median existing home price of $199,500 is up 12.8% from a year ago. Distressed sales accounted for 14% of total sales vs. 25% a year ago.
    • Total inventory fell 1.8% Y/Y to 2.13M homes, a 5-month supply vs. 5.2 months last year. The median time on the market of 54 days is up from 50 in September and down from 71 in October 2012.
    • Larry Yun: "The erosion in buying power is dampening home sales ... Moreover, low inventory is holding back sales while at the same time pushing up home prices in most of the country. More new home construction is needed to help relieve the inventory pressure and moderate price gains.”
    • Full report
    • Homebuilder and Residential REIT ETFs: XHB, ITB, REZ, RTL, PKB
    | Comment!
  • Nov. 20, 2013, 8:18 AM
    • Lennar (LEN) is the top pick, raised to Strong Buy from Buy, while Sell ratings are pulled on D.R. Horton (DHI) and KB Home (KBH) - both are now Holds.
    • Earlier: Overall mortgage applications fell 2.3% last week, but purchase apps rose 8%. Later: October existing home sales will be reported.
    • Related ETFs: XHB, ITB, PKB
    | Comment!
  • Oct. 24, 2013, 4:30 PM
    • Though the announcement is set for November, it will take at least six months for the lower limits to take effect, FHFA chief Ed DeMarco tells an audience. This should give the housing lobbying groups plenty of time to muster support for softening or eliminating the reductions.
    • The current loan limit runs as low as $417K for a single-family home. "Any reduction would be across the board, not just in some parts of the country," says DeMarco.
    • Fannie Mae (FNMA). Freddie Mac (FMCC).
    • Homebuilder ETFs: XHB, ITB, PKB.
  • Oct. 15, 2013, 10:30 AM
    • The boom-bust-boom cities might be heading back into bust territory as investors head for the exits. In Phoenix, investor purchases fell to 20% of sales in September from 29% a year earlier, with purchases by nine institutional investors falling to 110 homes from 398 a year ago (only four were buyers this September as opposed to all nine a year ago). Total home sales fell 2.5% in September even as homes for sale jumped 9.4%.
    • In Sacramento, home sales fell 6.8% Y/Y, while listings jumped 40.3%. Prices were up a modest 36.1%.
    • All-cash deals in Las Vegas fell to 47.2% in September, down from about 60% near the start of the year. The median sales price fell in September for the first time in nearly two years. "The market is softening tremendously," says a real-estate agent, noting big recent price cuts and builders boosting incentives.
    • More on builder incentives.
    • Homebuilder ETFs:  XHB, ITB, PKB.
  • Oct. 14, 2013, 10:07 AM
    • It's become a buyer's market again as rising interest rates (now compounded by the D.C. budget stalemate) hit new home sales. "I think there is a weakness in the market right now," says homebuilder Mark Ward. "Everybody's giving more incentives today than they were in the summer."
    • It's a big turnaround from this spring, when builders were scaling back incentives and instead raising prices by double-digit amounts. A Wells Fargo survey has 29% of respondents saying they're increasing use of incentives, double the amount of  year ago.
    • Lennar (LEN) cautiously admitted to boosting incentives on a "select" basis during its earnings call (transcript) last month, suggesting lower margins for the entire industry.
    • Homebuilder ETFs: XHB, ITB, PKB.
    | 1 Comment
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PKB Description
The PowerShares Building & Construction Portfolio (Fund) is based on the Building & Construction Intellidex Index (Index). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index thoroughly evaluates companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors. Securities shown to possess the greatest capital appreciation potential are selected by the Index.
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