Home builder stocks took a hit recently as did home improvement stocks. Why are these housing stocks down? Is this a correction that you can buy into or a warning sign to get out of the sector entirely? CNBC reports on falling home improvement stocks and the housing market.
Shares of Whirlpool tanked 11 percent Tuesday, after the home appliance company reported earnings that missed estimates amid a decrease in revenue. The company also cut its guidance, blaming “temporary U.S. demand softness as well as Brexit-related currency volatility and demand weakness in the U.K.”
Whirlpool is often considered an auxiliary housing play, as its washing machines, refrigerators and dishwashers are common purchases for those who have just bought a home or are doing a bit of home improvement.
For their part, Home Depot shareholders appeared to put more credence in Whirlpool’s take; Home Depot slid more than 3 percent Tuesday. And homebuilders like Lennar, KB Home and DR Horton fell as well.
When new home sales lag there is usually money flowing into remodeling and repair. The question for investors is whether fundamentals are bad and housing stocks will continue to decline or if this is just a glitch in an otherwise healthy market. The Street suggests buying into a housing recovery as existing home sales are up and to first time buyers.
The outlook for the long housing market recovery continues to be promising.
The latest boost came last week with the news that existing home sales were up – with first-time buyers the surprising drivers. Moreover, October’s Housing Market Index, a gauge of builder sentiment, is at its second-highest level for the past year.
Despite good fundamentals housing stocks are down. The Street sees this as a time to buy the biggest names in the home building business, Home Depot, Lowe’s D.R. Horton and Lennar.
Rebounding Home Sales
The Wall Street Journal reports the rebound in U.S. existing home sales.
A pickup in home sales last month signaled stabilization in the U.S. housing sector despite continued pressure from tight inventory and rising prices.
Sales of previously owned homes rose 3.2% from August to a seasonally adjusted annual rate of 5.47 million in September, the National Association of Realtors said Thursday.
That exceeded economists’ expectations for a more modest increase to a 5.35 million sales rate.
Home sales hit a high in June and then fell for two months. The September rebound implies that the late summer decline was an adjustment and not a permanent change in direction. Housing stocks are down based on sales reports that include the two declining months are may well recover as new and more recent sales figures come in.
Experts believe that any current oversupply will be dissipated by next spring when they expect to see solid growth in housing propelled by continued job gains and continued low mortgage rates. There appears to be a consensus on both sides of the political aisle that U.S. infrastructure is badly in need of repair. No matter whether Clinton or Trump ends up in the oval office the stimulus effect of more jobs in fixing American infrastructure is likely to drive the economy and improve the picture for housing stocks as well.