New Home Sales Diverge from Purchasing Apps, Analysts Note; 'Hope Trade' Boosts Builders
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Data from the Census Bureau Tuesday showed that new single-family home sales in November fell 2.1% to 464,000 from a revised 474,000 figure in October. Still, the number beat estimates of 440,000 and is up 16.6% from last year's 398,000.
Amid the figures, analysts at Compass Point note a continued divergence from the weekly purchasing applications trend as released by the MBA. While new home sales are up sharply, MBA Purchasing applications, which are usually a solid predictor of New Home Sales, are now down 11% year-over-year, the firm notes. They explain this divergence as either (1) an unusually high mix of new home sales rather than existing home sales among buyers or (2) a sign that New Home Sales in the coming months will be due for a correction.
As far as the home builder 'Hope Trade', or the historical outperformance of the builders vs the S&P 500 between November 21 and February 6 over the past 15 years, the firm doesn't expect it to play out for investors this year. The firm has been correct in this assessment up until the last 2 days, when this year's trend reversed and builders are now outperforming the S&P 500 during this year's Hope Trade by 9%. Still the firm doesn't see it sticking. "We continue to believe that cautiousness towards next year's spring selling season will limit the builders' outperformance in the coming months, though the trade has indeed gone against us the past 2 days," analyst led by Wilkes Graham stated.
Related ETFs:
SPDR S&P Homebuilders ETF (NYSE: XHB)
Related Stocks:
Lennar Corp. (NYSE: LEN)
Toll Brothers Inc. (NYSE: TOL)
PulteGroup, Inc. (NYSE: PHM)
KB Home (NYSE: KBH)
DR Horton Inc. (NYSE: DHI)
Beazer Homes USA Inc. (NYSE: BZH)
Amid the figures, analysts at Compass Point note a continued divergence from the weekly purchasing applications trend as released by the MBA. While new home sales are up sharply, MBA Purchasing applications, which are usually a solid predictor of New Home Sales, are now down 11% year-over-year, the firm notes. They explain this divergence as either (1) an unusually high mix of new home sales rather than existing home sales among buyers or (2) a sign that New Home Sales in the coming months will be due for a correction.
As far as the home builder 'Hope Trade', or the historical outperformance of the builders vs the S&P 500 between November 21 and February 6 over the past 15 years, the firm doesn't expect it to play out for investors this year. The firm has been correct in this assessment up until the last 2 days, when this year's trend reversed and builders are now outperforming the S&P 500 during this year's Hope Trade by 9%. Still the firm doesn't see it sticking. "We continue to believe that cautiousness towards next year's spring selling season will limit the builders' outperformance in the coming months, though the trade has indeed gone against us the past 2 days," analyst led by Wilkes Graham stated.
Related ETFs:
SPDR S&P Homebuilders ETF (NYSE: XHB)
Related Stocks:
Lennar Corp. (NYSE: LEN)
Toll Brothers Inc. (NYSE: TOL)
PulteGroup, Inc. (NYSE: PHM)
KB Home (NYSE: KBH)
DR Horton Inc. (NYSE: DHI)
Beazer Homes USA Inc. (NYSE: BZH)
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