“The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 4.4% in the year that ended in March, up from a 4.2% annual rate the prior month. March marked the highest annual growth rate since December 2018,” a Wall Street Journal report noted. “Sales of previously owned homes, which make up the bulk of the housing market, fell 8.5% in March from the prior month as the pandemic kept buyers and sellers on the sidelines, according to the National Association of Realtors.”
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Housing Stocks: Homebuilders Stocks Rallying to New Highs
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?
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.
TheStreet Ratings: 10 Best Construction Stocks for This Year
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Symbol
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Equity
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Rating
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|---|---|---|
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AMRC
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AMERESCO INC
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GLDD
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GREAT LAKES DREDGE & DOCK CP
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LEN
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LENNAR CORP
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BLD
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TOPBUILD CORP
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NVR
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NVR INC
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DHI
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D R HORTON INC
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MTH
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MERITAGE HOMES CORP
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GRBK
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GREEN BRICK PARTNERS INC
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IBP
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INSTALLED BLDG PRODUCTS INC
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PHM
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PULTEGROUP INC
|
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Toll Brothers Earnings Show a Housing Rebound Could Be Underway
According to Fool.com analysis; Some early shoots of growth are starting to reveal themselves for the housing sector. Right now, investors looking for clues should be watching the housing market, especially the homebuilders, as a tell on where we are in the economic cycle. Toll Brothers (NYSE:TOL) recently reported earnings and provided some interesting anecdotal evidence on the state of the housing market.
One of the more interesting things about the homebuilders is that many have odd fiscal years. While banks generally have end-of-December fiscal years, the builders are more mixed. Most still maintain a December fiscal year, but Toll Brothers uses the end of October quarter to finish out its fiscal year. The company recently reported earnings for its second quarter, which ended on April 30. This gives us an extra month’s worth of insight on the housing market currently being influenced by COVID-19.
There are signs of life for the housing sector after the latest data from the S&P
According to etftrends.com analysis; There are signs of life for the housing sector after the latest data from the S&P CoreLogic Case-Shiller National Home Price Index hinted at a potential recovery. This could help exchange-traded fund (ETF) investors looking at opportunities in homebuilders.
“The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 4.4% in the year that ended in March, up from a 4.2% annual rate the prior month. March marked the highest annual growth rate since December 2018,” a Wall Street Journal report noted. “Sales of previously owned homes, which make up the bulk of the housing market, fell 8.5% in March from the prior month as the pandemic kept buyers and sellers on the sidelines, according to the National Association of Realtors.”
“Housing prices continue to be remarkably stable,” said Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices, in a statement. “As much of the U.S. economy remained shuttered in April, next month’s data may show a more noticeable impact” from the pandemic.
This year, the central bank has been keen to keep interest rates unchanged. In addition, the central bank alluded to possible rate cuts for the rest of 2019. Once again, however, the rising costs of supplies could keep home prices rising, but that could be tempered if the current labor market remains robust.
