Despite the COVID-19 that has affected so many sectors and industries, housing stocks are rallying in the second quarter of 2020. Since April, some homebuilders stocks gained over 40% of the value. Analysts suggest that investors are encouraged low interest rates and positive housing data. Equity strategist, Matt Maley, claims that after a two-month run that resulted in an absolute rally for the housing stocks, ETF is turning heavily overbought. What is going on behind the curtains of the current rally and what investors need to know about housing stocks in 2020?
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Housing Stocks are Rallying Since April
XHB Homebuilder ETF jumped in value by over 40% in April, indicating strong positive momentum for the second quarter of 2020. Chief equity strategist at Miller Tabak, Matt Maley believes that the market of housing stocks is overheating after almost two months of rallying. Maley further claims that ETF is slowly becoming overbought, with an emphasis on “very overbought”. Maley warned investors to be careful in this stage of investing given the status of ETF classified as “overbought”.
Lumber Prices Great Indicators into the Value of Housing Stocks
Speaking for CNBC’s “Trading Nation”, Maley said that he will be watching the price of lumber, stating that lumber prices may act as fantastic indicators into the status of the housing market. After having a nice run in the previous weeks, lumber prices have taken sideways range in the last week and the end of May 2020.
Housing Stocks May Continue Rallying
Maley also stated for the same segment that in case lumber prices would break a 200-day moving average, that could be a sign that housing stocks are ready to continue with the rally and bring more rises to the market. Lenders are now making it more difficult for borrowers to get a mortgage which could stop the next rise of housing stocks.
