SPDR® S&P Homebuilders ETF
Mortgage rates fall as bonds sell off, affecting homebuilders
The average 30-year fixed-rate mortgage rose 12 basis points as the ten-year yield rose 10 basis points, and TBAs sold off. With the refinance boom over, originators are overstaffed.
Why consumers are more conservative about housing than the pros
In the latest survey, consumers expect home prices to rise by 2.9% over the next 12 months. This is flat month-over-month and down 100 basis points year-over-year.
Lennar reports increases in units and prices in 2nd quarter 2014
For the second quarter, Lennar reported $1.64 billion in revenues. This is an increase of 29% year-over-year. Homebuilding revenues increased 28%, to $1.6 billion from $1.3 billion in the second quarter of 2013.
Homebuilder sentiment leaps in June
The National Association of Homebuilder Sentiment Index is a closely-watched measure of future building activity The National Association of Homebuilders Sentiment Index measures the confidence of homebuilders. It gauges builder perceptions of current and future sales of single family residences and asks them to characterize them as “good,” “fair,” or “poor.” It also asks the […]
Why mortgage rates have been flat with the bond market, at 4.17%
The average 30-year fixed-rate mortgage was flat at 4.17%, as the ten-year yield rose 1 basis point, while TBAs rallied. With the refinance boom over, originators are overstaffed
Does the economy need a government spending shot in the arm?
Do we need a new New Deal? Construction spending doesn’t have to be simply residential (or private construction). Public construction also matters (however, it’s less than half of private construction dollars). The use of federal construction dollars to increase demand in the economy has been an issue of tremendous debate, with one side believing that […]
Why construction spending pulls back in June
Construction spending is just off its post-recession high, but it’s still depressed—current levels equate to mid-2003 spending levels—construction spending peaked at $1.2 trillion in March, 2006.
What to watch for in real estate next week
The week ahead Earnings season is pretty much over. Only five companies will report next week; nobody related to real estate is reporting. Next week is not all that heavy data-wise, although we will get the S&P Case-Schiller Home Price Index and Pending Home Sales. The Case-Schiller data will be from March, which should begin […]
Must-know: Can the government do something for the economy?
There has been a tug-of-war between the left-wing prescription of using the government to cushion the blows of a difficult economy and the right’s version of “let the markets clear.”
Consumers are tempering their home price appreciation expectations
The 2.3% home price expectation is much lower than the 6%–7% forecast we’re seeing out of the National Association of Realtors and the mid single-digit forecast we’re seeing from most Wall Street professionals.
D.R. Horton’s Gross Margins Fall Slightly
Like most other builders, D.R. Horton has been reporting lower gross margins due to sticker shock. Home prices have been increasing, but wage growth has been stagnant.
Construction Spending Fell in June
In June 2016, private construction fell 0.6%, and public construction fell 0.6% month-over-month.
GDP Will Be the Highlight This Week
We’re nearing the end of August—many investment professionals will be watching markets from the beach. The second revision to Q2 GDP will be out on Friday.
Must-know: Why mortgage rates rose slightly as bonds sold off
Mortgage rates are the lifeblood of the housing market, which is why the Fed began conducting quantitative easing (or QE) in the first place. Lower rates allow homeowners to refinance.
Manufacturing activity keeps improving in the Mid-Atlantic region
The Richmond Fed Manufacturing Survey looks at business conditions in the Fed’s fifth district, which covers Washington, DC, Baltimore, Richmond, and Charlotte.
Foreclosure Completions Drop In October
Since foreclosures represent a process that may or may not wind up with the bank owning the home, foreclosure completions are a better indicator of foreclosure activity than foreclosure starts.
Last Week’s Housing Starts Came In Stronger than Expected
Last week we had some stronger-than-expected economic data with housing starts and building permits topping 1.1 million.
Investor outlook: Consumer price inflation meets the Fed’s target
This report will probably hold the hawks on the Fed at bay and allow them to continue to maintain ultra-low interest rates. The Fed wants to see annual inflation of about 2%.
Why did new home sales surge in December?
New home sales jumped 11.6% in December from a month ago to a seasonally adjusted annual rate of 481,000.
Why Are Lennar’s Higher Margins Unsustainable?
Buyers are reluctant to pay higher prices, and builders have to offer incentives, which reduces margins. Lennar’s higher margins will not be sustainable.
Raymond James Downgrades Leggett & Platt to ‘Market Perform’
Leggett & Platt (LEG) has a market capitalization of $7.2 billion. The stock fell by 1.3% to close at $51.87 per share on August 1, 2016.
The Housing Industry Is Painting a Positive Outlook for the Economy
In April, the number of building permits issued was reported at 1.35 million, a decrease of 1.8% from the downward revised March reading of 1.37 million permits.
What Does D.R. Horton’s EBITDA Margin Say?
D.R. Horton’s EBITDA margin was at 10.1% as on March 2015, much better compared to 2.3% for fiscal 2011.
D.R. Horton Maintained Its Gross Margins
D.R. Horton’s gross margins held steady at 19.9% in the fourth quarter of 2015. However, they fell on a YoY (year-over-year) basis from 20.5% in the fourth quarter of 2014.
The Jobs Report: This Week’s Highlight for REIT Investors
We’ll get a lot of important economic data this week, and the biggest release will be the jobs report on Friday.
Mortgage Rates Are Not Buying The Rally Yet
The average 30-year fixed-rate mortgage decreased six basis points to close at 3.92%. The ten-year bond rose and yields decreased by 15 basis points.
Index of Leading Economic Indicators takes a breather in August
The Index of Leading Economic Indicators (or LEI) is a business cycle indicator. It’s based on 11 different economic statistics—average workweek, initial jobless claims, new orders, building permits, unfilled durable goods, commodity prices, consumer expectations, stock prices, and money supply.
Must-know: Inflation remains well-contained at the consumer level
Inflation is a double-edged sword. The Fed (or Federal Reserve) likes to see a little inflation because it’s associated with rising wages. But deflation causes a lot of economic problems, especially for the Fed.
Why Lowe’s Is Bullish on Its Prospects in the Medium Term
Lowe’s (LOW) expects year-over-year sales growth in fiscal 2016 to come in between 4.5%-5%.
Restoration Hardware’s New Luxury Retail Mantra: Bigger Is Better
On its 1Q16 earnings call, Restoration Hardware unveiled RH Modern, a new luxury retail concept store. It will be six to eight times the size of its other stores.
Bloomberg consumer comfort index hits a post-recession high, good for homebuilders
The Bloomberg Consumer Comfort Index rose to -28.3 for the week ending June 23 The Bloomberg Consumer Comfort Index is a weekly sentiment index that covers three critical variables: respondents’ perception of the state of the economy, their evaluation of their personal finances, and whether it’s a good time to purchase goods and services. The […]
How D.R. Horton plans to address the first-time homebuyer
D.R. Horton CEO Donald Tomnitz said that the first-time homebuyer will drive the next leg in the sector and has been underserved in this recovery.
What You Should Know about Stanley Security’s Business Mix
The Stanley Security business saw a steady decline in the last four years with sales falling from $2.4 billion in 2012 to ~$2.1 billion in 2015.
Nasdaq Flirts with Down 10%…in October
So this is painful. Very few were perfectly positioned into this selloff.
A Closer Look at the August 15 Drop in Housing Starts
Housing starts fell from a downward-revised ~1.16 million to ~1.13 million in August 2015. This was below Wall Street estimates of just over 1.16 million.
The FOMC Leaves The Big Question About Jobs Unanswered
There was no discussion of the “speed limit” issue in the July FOMC minutes. This is generally a “cyclical versus structural unemployment” issue.
What Happened to KB Home’s Earnings in 2Q16?
KB Home’s net income came in at $15.6 million on a GAAP (generally accepted accounting principles) basis, as compared to $9.6 million in 2Q15.
Why Armstrong World Industries’ profits drop in 2Q
Armstrong World Industries stock fell at the end of last month. Its 2Q14 earnings and revenue fell short of analysts’ expectations. Revenue was up 0.5% to $710 million compared to the same quarter last year. Adjusted diluted earnings per share (or EPS) fell 1% to $0.60. Net income declined 31.4% to $21 million.
Why higher costs and charges impact Armstrong’s business segments
Resilient Flooring net sales in the second quarter and first six months of 2014 declined 2%. Net sales were driven by lower volume in the Americas and Europe. Operating income also declined.
Seasonality Trumps The Bond Market Rally
The MBA Purchase Index decreased 6.9% in the week ended December 12, 2014, despite a strong bond market rally.
Leggett & Platt Will Discuss Its Target and Opportunities on September 14
LEG rose by 0.27% to close at $51.84 per share during the fifth week of August, with weekly, monthly, and YTD price movements were 0.27%, -1.8%, and 25.1%.
Why you should invest in homebuilder ETFs like XHB and ITB
ETFs present another investment avenue. Apart from pure homebuilder ETFs, there are many other ETFs that offer exposure to homebuilders.
Must-know: Will the government help the first-time homebuyer?
Between low prices and low borrowing rates, the first-time homebuyer should have been set. However, lenders greatly tightened credit standards and many first-time homebuyers found themselves shut out of the mortgage market.
Analyzing the New Deal: Do We Need a New One?
Historically, the use of public construction dollars has been the big lever that the government uses to stimulate the economy. This dates back to the New Deal.
A decline in manufacturing causes industrial production to fall
Up until January, industrial production and manufacturing production had been accelerating, so it is premature to draw any major conclusions from one disappointing report.
Must-know: Why home-price appreciation is leveling off
In July, home prices increased 0.1% month-over-month. They’re up 4.4% year-over-year (or YoY). Prices are now within 6.5% of their April 2007 peak. They correspond to the levels in July 2005. Real estate values drive consumer confidence and spending. They have an enormous impact on the economy.
Federal Reserve forecasts 2.55% GDP growth in 2013
The Federal Reserve includes formal economic forecasts like GDP in the minutes from its Federal Open Market Committee (or FOMC) meetings.
Why construction spending is so important to the economy
Historically, construction spending has led economies out of a recession.
New home sales increase 29% from a year ago, positive for homebuilder stocks
May new home sales, as reported by the Census Bureau and the Department of Housing and Urban Development, increased 2.1% from April New home sales increased to an annualized pace of 454,000, up 2.3% from April (which was revised upward from an initial estimate of 454,000 to 466,000) and up 29% from a year ago. […]
Can Investors Keep Forecasting the Final Non-Farm Payroll Correctly?
ADP’s June non-farm payroll numbers indicated an increase of 172,000 jobs in the private sector. ADP’s non-farm payrolls have been mostly accurate.
Purchase applications fall as we enter the seasonally slow period
The MBA Purchase Index decreased 2.6% last week in response to strong bond market sell-off and a holiday-shortened week. We’re entering the seasonally slow period for the real estate sector, which pretty much lasts as long as football season.
Manufacturing production drops due to bad winter weather
Manufacturing output fell 0.8% after increasing 0.3% in December. The output for utilities rose 4.1% in January on cold weather in the Northeast.
Mid-Atlantic manufacturing remains sluggish, bad news for NVR?
The Richmond Fed Manufacturing Survey looks at business conditions in the Fed’s fifth district, which covers Washington, DC, Baltimore, Richmond, and Charlotte The Richmond Fed Manufacturing Survey is sent out to companies in the Mid-Atlantic states and covers current business conditions, shipments, new orders, backlog, and inventory. It’s similar to the other surveys put out […]
Inflation continues to come in below the Fed’s target: What does this mean? A double-edged sword?
Inflation is a double-edged sword. The Fed (or Federal Reserve) likes to see a little inflation because it’s associated with rising wages. But deflation causes a lot of economic problems, especially for the Fed.
Must-know: Current housing starts from a historical perspective
Following the collapse, we saw starts average around 687,000 units per year, with a low of under half a million.
Investing in Lennar through Homebuilder ETFs
Lennar sees allocation in major sector-specific homebuilder ETFs such as the SPDR S&P Homebuilders ETF (XHB). XHB has a 3.36% stake in Lennar.
Could margins for homebuilders like Toll Brothers contract?
Manufacturing activity is a good sign for job growth, which has been the Achilles’ heel of this recovery. Although manufacturing isn’t the driver of the economy that it used to be, it still matters.
Can Lowe’s Expand Its Fiscal 2Q16 Operating Margin?
Lowe’s Companies’ (LOW) gross margin dipped by 43 basis points to 35% in fiscal 1Q16.
Real Estate Price Appreciation widely dispersed by location
The Zillow Home Value Index (ZHVI) rose 5.1% year-over-year to $157,600. The ZHVI is a modeled index, based on the average zillow estimate of home values in each area. The Zillow index is not solely based on home sales, so it isn’t really a comparable index to Case-Schiller. It is closer to Radar Logic, which […]
Behind Homebuilder Sentiment So Far in May
The NAHB Wells Fargo Housing Market Index measures homebuilder sentiment has been increasing steadily since 2009. Recently, it’s started to accelerate.
What’s Stanley Black & Decker’s Market Position?
Stanley Black & Decker (SWK) has a stupendous record of launching at least 1,000 products every year at an average of three products a day.
Institute of Supply Management’s Purchasing Managers Index falls in April
The Institute of Supply Management index assesses the state of manufacturing in the United States. The Institute of Supply Management (ISM) Purchasing Manager’s Index (PMI) is similar to the other regional PMI indices, however it covers the entire country. The ISM PMI looks at various business indices like new orders, production, employment, supplier deliveries, inventory, […]
KB Home Just Reported Strong Revenue Growth for 2Q16
For 2Q16, KB Home reported revenues of $811 million, which easily topped the Wall Street estimate consensus of $750 million. Revenues increased by 30% YoY.
A bond market sell-off greets Yellen’s first FOMC announcement
Yesterday, the Federal Reserve ended its March FOMC meeting and decided to continue to reduce asset purchases.
Mortgage rates fall despite a bond market sell-off
Over the past several months, mortgage rates and the ten-year bond yield stopped correlating. Last week, this trend broke as the two variables lined up once again.
A Brief Overview of Honeywell Automation and Control Solutions
Honeywell (HON) provides control solutions for various residential and industrial applications through the Honeywell Automation and Control Solutions–ACS unit.
Why Lowe’s Bought Orchard Supply and Is Eyeing Smaller Stores
Lowe’s is also experimenting with the idea of rolling out other smaller format stores like City Center stores in other under-penetrated and high-density urban areas in the US.
A lack of first-time buyers: Pending home sales fall again
The return of the first-time homebuyer is the missing link to a more normal housing market. Household formation numbers have been depressed since the Great Recession began.
What Are Stanley Black & Decker’s Business Segments?
Stanley Black & Decker (SWK) markets its products through three business segments: Global Tools & Storage, Security, and Industrials.
Housing starts dampened by wet weather in the Midwest
Housing starts are a critical predictor of future home builder sales Housing starts are released jointly by the Census Bureau and the Department of Housing and Urban Development. Analysts use the information to anticipate future production for home builders, future demand for raw materials, and labor costs. This data will even affect the forecasts for […]
How to Invest in D.R. Horton through ETFs
D.R. Horton sees allocation in major homebuilding sector-specific ETFs like the iShares Dow Jones US Home Construction Index Fund (ITB).
Lowe’s Retail and Pro Customers: Who Accounts for More Sales?
The retail customer accounts for about 70% of Lowe’s sales. However, retail customers account for about two-thirds of Home Depot’s (HD) customer base.
March Retail Sales Prove Bullish for Most Categories
Building materials and garden equipment and supplies dealers accounted for ~6.4% of March retail sales. Home furnishing and furniture stores accounted for ~2% of sales.
This Week’s Important Labor Releases for REIT Investors
The week after the jobs report is usually pretty data-light, although this week does have some important labor and manufacturing data.
The bad: Why the housing market has yet to find shelter
The housing market, especially construction, has been a cause of concern to policymakers in the Federal Reserve.
Why May’s Inflation Was Just Hot Enough
On June 12, the US Bureau of Labor Statistics reported that US consumer prices rose 0.2% in May, adding to the 0.2% increase seen in April.
Lowe’s Valuation Multiple Compared to Its Peers
Lower-than-expected 1Q17 earnings and unfavorable macroeconomic indicators made investors skeptical about Lowe’s future earnings.
Lennar Keeps Reporting Big Increases in its Revenue
For the first quarter of 2015, Lennar (LEN) reported $1.6 billion in revenue. This is an increase of 21% year-over-year.
Manufacturing Production Increased In November
Manufacturing output increased 1.1% in November. Durable goods’ production increased 1%. Auto-related manufacturing increased as well. Business equipment increased 1.2%.
Housing starts increase in September to 1.018 million
Most builders—like Lennar (LEN), PulteGroup (PHM), D.R. Horton (DHI), and KB Home (KBH)—noted that traffic was beginning to decline. Buyers experienced sticker shock.
Introduction to the Fannie Mae National Housing Survey
Homebuilders use data from the Fannie Mae survey to measure consumers’ attitudes toward future home price appreciation. This affects attitudes about risk-taking.
Must-know: Why did construction spending tick up in April?
Construction spending rose to a seasonally adjusted annual rate of $953.5 billion in April from $951.6 billion in April. Spending is up 8.6% year-over-year.
Construction spending is very important for the economy
If residential home prices begin to level off, then the builders will have to increase units to drive the top line. This will be bullish for the economy because it will put a lot of people to work.
New Home Sales Rose to a 7-Year High in February 2015
The report on new home sales looks at new, privately owned single-family homes sold in a month. New home sales account for one-tenth of the US housing market.
Housing Starts Have A Long Way To Go To Reach Normalcy
Following the collapse, we saw starts average ~687,000 units per year with a low of under half a million. That’s a tremendously depressed level.
Will foreclosure completions’ 1,000 unit rise affect builder stocks?
Foreclosure activity is closely watched by investors, realtors, and homebuilders alike because it forecasts future housing supply.
Did Home Depot Beat Wall Street Expectations for Fiscal 2016?
Home Depot reported record results for both the quarter and the fiscal year. The company also beat market expectations for both revenue and adjusted EPS in the fourth quarter.
Why Armstrong World Industries lowers full year guidance
Shares fell at the end of July because of the company’s lackluster outlook. The outlook was based on the market activity in May and June. It was also based on the recent downward revisions to gross domestic product (or GDP). AWI lowered its full year guidance for sales by $100 million.
Why home prices should be moderated—Home Price Index
The 20-city index reading for March, implied an average month-on-month (or MoM) price increase of 0.9% in the 20 metros tracked by the index.
Declining energy prices may not be enough to maintain margins
Manufacturing activity is a good sign for job growth. Job growth has been the Achilles’ heel of this recovery. Although manufacturing isn’t the economic driver it used to be, it still matters.
Foreclosure Starts Drop: Good News For The Builders
The overall drop in foreclosure activity over the past year is good news for homebuilders. Currently, gross margins are experiencing seven-year highs.
Putting Construction Spending Into Economic Perspective
We’ve seen big increases in average selling prices out of homebuilders such as Lennar Corporation (LEN), Toll Brothers Inc. (TOL), D.R. Horton, Inc. (DHI), and Pulte Homes, Inc. (PHM).
Building Permits Fall In November As Skilled Labor Becomes An Issue
Building permits and housing starts data are released jointly by the Census Bureau and the Department of Housing and Urban Development.
Manufacturing Activity Continues to Chug Along
We’re seeing energy-intensive industries relocate back to the US. This will do wonders for the employment picture. It will provide good-paying middle-class jobs—which this country desperately needs.
Why foreclosure starts tick up in September
The large foreclosure pipeline in the judicial states is one reason why prices are still weak in the northeast. Homebuyers don’t focus solely on existing supply.
Construction spending falls again, a negative for the economy
Construction spending is just off its post-recession high, but it’s still depressed. Current levels equate to mid-2003 spending levels.
Why we need to relook at the consumer in this week’s releases
This week is full of indicators, with most of them being measures of national-level economic activity.
Why durable goods trends affect key wholesale trade releases
The Monthly Wholesale Trade Survey gives you nationwide estimates of monthly sales, end-of-month inventories, and inventories-to-sales ratios by businesses for wholesale firms.
Offloading Treasuries and MBS positions will affect the market
If the Fed reduced its Treasury and MBS holdings, a considerable amount of liquidity would be erased from the market. Interest rates would likely trend higher.
Market Share Play: Lowe’s Bid to Gain Scale in Canada with Rona
The Rona (RON.TO) acquisition should give Lowe’s (LOW) a market-leading position in Canada’s home improvement market, estimated at over $45 billion Canadian.