Housing Market And Homebuilder ETFs May Slow: S&P

Includes: ITB, XHB
by: Tom Lydon

Positive housing data has pointed to a recovering market, but S&P Capital IQ analysts provide a more staid outlook on homebuilder stocks and exchange traded funds.

"S&P Capital IQ has a negative fundamental outlook for the homebuilding sub-industry for the next 12 months," writes Todd Rosenbluth, S&P Capital IQ ETF analyst, in a research note.

S&P Capital IQ equity analyst Michael Souers believes builders are in a stable competitive position after reducing costs, lowering debt and increasing cash. However, he thinks that rising foreclosure activity in 2013 could dampen home prices.

"We think the housing market will improve over the next year, but shy of consensus views for stronger growth," the S&P analysts added.

The analysts also hold an underweight rating on the iShares DJ US Home Construction (BATS:ITB). The SPDR S&P Homebuilders ETF (NYSEARCA:XHB) is another fund that targets the sub-sector.

On Monday, the National Association of Realtors said its seasonally adjusted index for pending home sales dipped 4.3% in December from November, signaling that sales on previously occupied homes may cool in the spring, USA Today reports.

"We believe the disappointment represents just a brief lull in what are volatile data rather than a fundamental change of direction," Jim O'Sullivan, an economist at High Frequency Economics, said in the article.

According to the S&P/Case-Shiller home-price index, home prices rose 5.5% in the year ended November 2012, compared to the 4.3% year-over-year reading for October, reports Alison Rogers for TIME.

"Housing is clearly recovering," David M. Blitzer, chair of the index committee that released the data, said in the TIME article.

However, Robert Shiller, a co-creator of the index, believes that "there is too much uncertainty to justify any aggressive speculative moves right now," ahead of the spring buying season.

iShares DJ US Home Construction

Max Chen contributed to this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.