Guess what sector just pulled ahead of tech?
06/14/17

Move over tech wreck. Here come homebuilders.

Sure, plenty of attention has focused on the likes of Apple (NASDAQ: AAPL) and Facebook (NASDAQ: FB) following sharp drops in the Nasdaq recently. But yesterday traders noticed capital flowing into another, very different, kind of sector as those same Silicon Valley stalwarts groped for support.

The PHLX Housing Sector Index hit 282 yesterday, its highest level since the subprime real-estate bubble was in full-froth during the summer of 2005. It’s up 18 percent so far on the year and has now pulled ahead of the Select Technology Index’s 16 percent gain over the same period. Houses ahead of tech? Who’d a thunk it?

Well, it’s not like the sector lacks good news. Last week, for instance, mortgage applications to buy a home (excluding refis) hit a seven-year high.1 Home-price indexes have shown steady gains, and measures of builder sentiment have steadily ticked higher.2 Sure, some folks have grumbled about slow sales, but realtors are quick to blame that weakness on lack of supply – hardly a problem if your business is cranking out abodes.3

PHLX Housing Index (HGX), 6-month chart

Source: OptionsHouse by E*TRADE

Traders following yesterday’s move may also have their eyes on the forward calendar, which brings potential catalysts each day into the weekend. Mortgage applications were scheduled for release this morning, followed tomorrow by NAHB’s survey of industry conditions. Friday morning brings the Commerce’s Department’s monthly totals for housing starts and building permits.

Some of the big names in the sector include D.R. Horton (NYSE: DHI), Lennar (NYSE: LEN), and Toll Brothers (NYSE: TOL). Traders also focus on suppliers like Masco (NYSE: MAS), Home Depot (NYSE: HD), Mohawk Industries (NYSE: MHK), and USG (NYSE: USG).

Bottom line: Tech isn’t the only game in town. Housing stocks have also been coming to life as recent high fliers come back to earth.

 

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1. Bloomberg: U.S. Mortgage Applications Surge to a 7-Year High. 6/7/17.

2. RTTNews: U.S. Homebuilder Confidence Unexpectedly Improves In May. 5/15/17. Marketwatch: Home prices pick up steam as spring selling season heats up, CoreLogic says. 6/6/17.

3. Reuters: Housing recovery intact despite drop in new home sales. 5/23/17.