24/7 Wall St. » HXB

Moody’s Calls Bottom in Homebuilders, Sort Of (XHB, ITB, HOV)

247wallst — Thu, 17 Dec 2009 15:46:08 +0000

Moody’s Investors Service has raised the bias and outlook on the U.S. homebuilder sector this morning. Its report was titled “U.S. Homebuilding Industry Shows Signs of Stability” and the ratings agency raised the sector’s outlook to Stable from Negative. In short, Moody’s believes or suggests that a bottom has been reached. There are some concerns still present here that might be worth a consideration before just hoping that the key stocks in the sector or that the key ETFs tracking housing will be great buys in 2010.

The SPDR S&P Homebuilders (NYSE: XHB) is down only about 0.25% at $14.83 on the day versus a 52-week trading range of $8.00 to $16.75. The iShares Dow Jones US Home Construction (NYSE: ITB) is down about 0.8% at $11.63 verss a 52-week trading range of $6.33 to $13.93. Both ETFs have recovered from their lows. Hovnanian Enterprises Inc. (NYSE: HOV) had a huge day yesterday on the heels of the housing starts data, but the after-hours and pre-market reaction to its earnings, ergo losses, was a selling of the stock. The homebuilder posted a wider-than-expected loss and it noted a 24% cancellation rate during the quarter. The stock was down over 10% after earnings in the after-hours session, but came up substantially off of its lows to being down 6% and we had shares trading at the similar level this morning in pre-market. At 10:35 AM we have shares down only about 4% at $4.06 (versus 52-week trading range of $0.52 to $5.75), and part of this recovery may be due to the Moody’s report.

Moody’s synopsis is that the stable outlook expresses a view that fundamental credit conditions in the industry will neither erode nor improve materially over the next 12 to 18 months.

Moody’s has cited that housing starts, new home sales, and existing home sales have all shown positive trends, and housing affordability is at the strongest point seen in many years. This is on the heels of a November figure showing a 8.9% rise in housing starts.

While specifics from homebuilders may be sketchy when you review the latest earnings from homebuilder stocks, Moody’s did note that operating profits of the rated homebuilders are also expected to show modest improvements in 2010. Of course, US government support remains a critical piece of the puzzle, and any backing away from that would put the rating outlook at risk of going back to negative.

The issue to consider is here is the availability of mortgages and whether foreclosures can abate substantially in 2010. Foreclosures are competing against new home sales and existing home sales. If the shadow supply from the banks and lenders that was foreclosed or has been given a permanent reprieve from foreclosure come on the market, the worst case scenario for homebuilders can come back: houses will start selling for cheaper than they can be built. That seems to be the case in Michigan now, and it was certainly the case during the Texas bust of the 1980′s.

JON C. OGG

Posted in Analyst Calls, ETF, Housing Tagged: HOV, HXB, ITB

Cheering Poor New Home Sales (XHB)

247wallst — Wed, 24 Jun 2009 14:14:06 +0000

The data on new home sales for the month of May is going to be a disappointment even for the green shoots crowd, at least on the surface. Sales of new homes in May fell by 0.6% to 342,000 on an annualized rate. Dow Jones had estimates calling for a 2% gain to 360,000. The numbers in April were revised to 344,000 from a prior target of 352,000.

The SPDR S&P Homebuilders (NYSE: XHB) is now up 2.4% at $11.54. It looks like if this is bad news for the homebuilders and appears to be at least close enough or in-line with what the green shoots crowd was willing to accept.

To demonstrate how weak these numbers are, this is a drop of more than 30% in new home sales from May 2008.

The median price for a new home in May fell by more 3% to $221,600 on a year over year basis. But if you are looking for some green shoots, this is actually above the reading in April 2009 of $212,600.

To show how slow this really is, this annualized figure translates to roughly 32,000 new homes being sold nationwide. That is not very exciting and not promising of any massive return to growth ahead of the summer buying season.

The real tell for how housing is going to shape up for the rest of 2009 will be the data coming out over the next three months during the strong summer buying season.

Jon C. Ogg
June 24, 2009

Posted in Economy, Housing Tagged: HXB

Some Relief In Homebuilder Data (XHB)

247wallst — Wed, 15 Apr 2009 17:22:25 +0000

The National Association of Home Builders monthly index for this month took a huge leap from 9 to 14 to get the index out of single digit territory and at a 6-month high. The bad news is that the reading for “equilibrium” between growth and contraction is 50. So this is far from good news. There are still many issues and many issues have created this “bounce” data. The SPDR S&P Homebuilders (NYSE: XHB) ETF is up 5% at $12.15 today, but be advised that this has actually come off of highs from right before the NAHB data was released.

Here is the breakdown:
current sales conditions rose to 13, from 8 in March;
prospective buyer traffic rose to 14, from 9 in March;
and future sales expectations (6-months out) rose to 25, from 15 in March.

What is intersting here is that the traffic seems to be based upon lower and lower housing prices. Many builders are selling at cost or even under, and there is still a monster wave of foreclosure properties out there. Just this morning we saw another survey that noted how foreclosures are back on the mend.

This is based upon 360 homebuilder surveys. What we have found in our own checks is that homes that fit deep into the conventional mortgage levels are now moving because the price has become very affordable with very low rates. If it is a jumbo loan and there are any mortgage tricks or any credit issues, let’s just say that segment of housing is playing the “NOT INCLUDED” game. That $8,000 tax help has so far not added in as much as we would have hoped, or at least that is what we are being told from realtors.

Jon C. Ogg

Posted in Economy, ETF, Housing Tagged: HXB

Toll CEO Unloads Even More Stock (TOL, XHB)

247wallst — Thu, 19 Mar 2009 16:39:44 +0000

Toll Brothers Inc. (NYSE: TOL) has submitted two different filings showing that CEO Robert Toll unloaded 1 million shares this week.

The stock closed in at $14.26 on March 2, 2009. It traded as low as $13.72 the following day as worries about the economy battered the stock. You will see the prices below and see the $18.00 price today. As far as a a comparison, the SPDR S&P Homebuilders (NYSE: XHB) recently put in lows of $8.00 and it is at $10.45 today. That puts the Toll shares up over 31% from recent lows and the ETF is up 30% from recent lows.

There was a filing from last night that showed Mr. Toll had unloaded a half-million shares, but the new filing shows him now at 1 million shares being sold this week.

03/16/2009 Sold 470,192 shares at $17.3674 average;
03/17/2009 Sold 29,808 shares at $17.0126 average;
03/18/2009 Sold 467,600 shares at $17.4611 average;
03/18/2009 Sold 32,400 shares at $18.0664 average.

This leaves the CEO with 13,360,607 shares in direct ownership. He has almost another 4 million shares in indirect entities or in options and retirement accounts.

Mr. Toll does have a substantial amount of stock left. But this looks like fairly aggressive selling from an insider, and it comes on the heels of what has all the earmarks and calling cards of a major and massive bear market rally. Even if the worst has been seen, this looks like fairly aggressive selling considering that so many are doubting the strength of this recent rally.

JON C. OGG

Posted in Housing, Insider Activity Tagged: HXB, TOL

Housing Stocks…Ignoring Poor Housing Data (HXB, PHM, DHI)

247wallst — Tue, 02 Oct 2007 09:27:17 +0000

The National Association of Realtors monthly Pending Home Sales Index for August came in at 85.5, Month on Month -6.5%, and Year over Year -21.5%.

This is perhaps the worst data on recent record, but it is worth keeping in mind that this data is August and before the FOMC rate cut. It was also during the worst mortgage month when every single headline was revolving around headlines and story lines saying "billions of dollars lost here" and "billions of dollars lost there" were on every television station (while "Flip That House" versions were still running rampant on TV).

The SPDR Homebuilders ETF (AMEX:XHB) is up almost 5% today at $23.20 and the ETF did maintain its strength after these numbers came out. Citigroup’s upgrade for a trade yesterday is turning out to be quite a call. The XHB ETF closed Friday at $21.40, almost an 8.4% gain in two days.

Of the largest homebuilders, it looks like a 7% gain in DR Horton (NYSE:DHI) and in Pulte Homes (NYSE:PHM) are leading the pack.

Jon C. Ogg
October 2, 2007