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Home Builder Activity A Warning Sign?

ByNicholas Santiago
Published 05/29/2013, 12:21 AM
Updated 07/09/2023, 06:31 AM
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Today, the leading home-builder stocks have rolled over a bit after the Case-Shiller survey. The Case-Shiller survey reported a 10.9 percent increase in home prices in March, this was the highest increase since April 2006. Initially, the leading housing stocks popped on the news, but since that time these leading housing stocks have reversed and traded lower throughout the afternoon.

Two of the most important home-builder stocks that any trader can follow are Lennar Corp. (LEN), and Toll Brothers Inc (TOL). Both of these stocks have faded sharply from the opening bell. LEN stock is trading lower by 0.65 cents to $42.14 a share. Day traders should watch for intra-day support around the $41.40 level. Some other leading home-builder stocks that have faded from the morning highs include DR Horton Inc. (DHI), and PulteGroup Inc (PHM).

The home-builder stocks have led the major stock indexes higher since October 4, 2011. This leading industry group has benefited from record low yields. Today, yields on the 10-year note are higher by 0.124 to $2.135 percent. Higher yields on the 10-year U.S. Treasury Note could stall out the housing boom. Private equity firms have also been buyers of single family homes which has helped to take excess inventory out of the market. The Federal Reserve has also been buying about $45 billion a month worth of mortgage backed securities. All of these stimulating factors have helped to rally the housing stocks over the past year. Any sharp rollover in the housing sector could be a warning sign that this current stock rally could be coming to an end.
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