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Economic News February 23: Home Builder Stocks Are Rising Ahead Of Friday

|Includes: HD, LOW, LZB, TPX, Williams-Sonoma Inc. (WSM)

On Friday morning, the Census Bureau of the Department of Commerce will release its New Home Sales for February report after the National Association of Realtors (NAR) released its report for existing home sales for January on Wednesday.

The NAR report, which is considered a decent indicator of the state of the housing market, revealed that home resales rose 4.3% to a 1-1/2-year high last month while the supply of houses on the market is now at its lowest level in nearly seven years. Moreover, sales were up in all four regions of the country with the biggest gain of 8.8% coming from the West.

This data was interpreted positively as a sign that the housing market may be coming of its floor but there is some suspicion that part of the rise was due to unseasonably warm winter weather while news about Europe overshadowed the report - meaning the market did not react much to it. Nevertheless, confidence among homebuilders is reportedly nearing five-year highs as they break ground on new housing projects.

Hence, the Friday report from the Census Bureau of the Department of Commerce will be interesting to hear - especially for anyone investing in or trading homebuilder stocks as this report will provide an indication of the number of new privately owned one-family houses sold and for sale.

Moreover and on Thursday, most homebuilder stocks were already making respectable gains by the middle of the trading day - perhaps making up for Wednesday and in anticipation for Friday's new home sales report. Otherwise its worth noting that the SPDR S&P Homebuilders ETF (NYSEARCA:XHB) is up around 17% since the start of the year, up 32% over the past three months and up 48% over the past six months but up only 13% over the past year and is down 46% over the past five years.

Of course, there are plenty of other ways to play any recovery in the housing sector without investing in risky home building stocks. This includes focusing on home improvement retailers or building material stocks like Home Depot (NYSE:HD) or Lowe's Companies (NYSE:LOW) plus other home related stocks like furniture retailer Williams-Sonoma (NYSE:WSM), reclining chair maker La-Z-Boy (NYSE:LZB) and mattress maker Tempur-Pedic International (NYSE:TPX) - all of which will benefit from any sign of a housing sector recovery.

Nevertheless, it's also important to remember that both reports from the Census Bureau of the Department of Commerce and the National Association of Realtors (NAR) are often subject to major revisions in the weeks or months after their release and they are not perfect gauges of market sentiment. This means that homebuilder stocks along with stocks in related industries may or may not make a move on Friday.

Either way and if you are trading stocks that could make a move, it would be a good idea to check you stock forecasts for these stocks to find out what direction they may move in - especially in the wake of the more optimistic existing home sales report on Wednesday.


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.