Homebuilders Slip as More Good News Sickens Sugar-High Investors

December 27, 2012 11:24 AM EST
The latest homebuyer figures today showed November new homes sales rose to their highest level in 2-years, at 377,000. This was ahead of revised October figures showings sales of 361,000 and in-line with estimates for 380,000. The increased pace of buying comes as mortgage rates remain near record lows.

Despite the positive data, shares of many homebuilders declined early on Thursday as fiscal cliff concerns created worry about the fragility of U.S. homebuyers.

Valuation is another investor concern, as many homebuilder stocks are poised to end the year significantly higher. Year-to-date, shares of Lennar Corp (NYSE: LEN) are higher by 91 percent, PultieGroup (NYSE: PHM) investors are seeing gains of 172 percent over the same period, and Hovnanian Enterprises Inc. (NYSE: HOV) racked up whopping gains of 330 percent. It is no wonder investors in the sector are starting to get jittery.

While homebuilders clearly have an enemy in U.S. lawmakers, they have more than a friend in Fed chairman Ben Bernanke and his massive MBS and bond buying programs. Fiscal cliff or not, policy makers appear committed to efforts to keep housing afloat, and so despite today's modest selloff and despite its stretched valuations, homebuilders on the whole are likely to remain buoyed heading in the first quarter of 2013, according to many analysts.

Sector ETF SPDR S&P Homebuilders (NYSE: XHB) is down 0.5 percent today.

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