For over a year, homebuilding stocks have been among the hottest in the world.
If you haven’t seen it, here’s a 3-year chart of XHB, the big homebuilder ETF.
You can see how sharp the move up has been since last October.
The companies in this space have seen improvement, as new home sales and housing starts have turned the corner.
You can see how violent the move up in housing starts has been over the last year.
But there are warning signs.
Diana Olick — CNBC’s ace real estate reporter — flagged this bit from the DR Horton conference call:
It’s one thing to jump on the bandwagon when things are getting better, it’s quite another to jump off of it when everyone around you, not to mention your own company’s earnings, would seem to confirm that sentiment. But that’s just what Donald J. Tomnitz, CEO of D.R. Horton, the nation’s largest homebuilder by volume did.
“I still don’t see a lot of jobs being created,” he told an earnings conference call, sending his company’s stock down when it should have been riding higher on a 24 per cent year-over-year jump in new orders for homes. He is concerned about the future of this fledgling housing recovery, and he has reason to be. Mortgage delinquencies and foreclosures are driven by unemployment.
In the last several days, DR Horton shares have fallen nearly 15%.
Elsewhere on the call, Tomnitz used extremely cautious language to describe the comeback, when asked about assets of the firm’s that have been “mothballed.”
And as the market continues to recover ever so slightly, we will and are beginning to take obviously pieces of land out of our mothballed assets.
At the same time, there are still plenty of signs that the market is super-hungry for anything housing related. Home Depot hit a new high. Sherwin Williams (the paint company) continues to go bananas.
Bottom line though: There’s been a massive run, stocks have gone wild, and not everyone on the inside are fully on board.
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