Monday, June 18, 2012

Housing Stocks Put Together Rally After Builder Sentiment Improves

From Forbes - MARKETS | 6/18/2012 @ 10:25AM

Steve Schaefer, Forbes Staff

Housing Stocks Put Together Rally After Builder Sentiment Improves

Declines outnumbered declines by a comfortable margin among U.S. stocks Monday morning, as any enthusiasm for a win for the status quo in Greece proved short-lived. There was at least one pocket of strength in the equity market though, with home builders climbing amid the broader weakness.

The impetus for the rally came from the monthly gauge of sentiment from the residential construction industry, with a one-point gain from the National Association of Home Builders monthly index. At a reading of 29, the measure touched its highest level since May 2007.

Barry Rutenberg, NAHB chairman and a builder from Gainesville, Fla., said the June uptick, on the back of a four-point climb in May, “is reflective of the continued, gradual improvement we are seeing in many individual housing markets as more buyers decide to take advantage of today’s low prices and interest rates.”

Obstacles to a broader recovery remain, including tight lending conditions,” noted NAHB chief economist David Crowe. Regionally speaking June’s index was mixed, with solid gains in the Midwest and West, while the Northeast and South backtracked from May.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, writes in a note Monday that the NAHB survey signals “an upside bias to the sales/starts numbers for the next few months,” but warns that the index “has been running well ahead of the official new home sales numbers for some time.”

Monday’s reading set off a rally in housing stocks though, with builders like Toll Brothers, PulteGroup and Lennar each up better than 1% while the broader market showed a narrow decline in the first hour of trade.

Other housing-related plays made slim gains, including home-improvement retailers like Home Depot, and Lowe’s, Bed Bath & Beyond, and paint specialist Sherwin-Williams.

The SPDR S&P Homebuilders ETF, which includes most of the aforementioned names, was 0.2% higher. The S&P 500 was essentially flat after recouping early losses.

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