led the stock market higher Tuesday as home-improvement giantHome
) beat earnings expectations and U.S. home prices scored their
biggest gains in six years.
stock market today
,iShares Dow Jones U.S. Home Construction (
) vaulted 4% -- among the top five of nonleveraged ETFs. From its
52-week high, ITB has fallen 7%, which is considered a normal
pullback in an uptrend.
It carries a healthy IBD Relative Strength Rating of 85 and
Accumulation/Distribution Rating of B- on an A-to-E scale. That
shows it has outpaced 85% of the stock market the past 12 months
and that institutions are heavily buying more shares than
SPDR S&P Homebuilders (
) spiked 3%.
SPDR S&P 500 (
) rose 0.68%.
Home Depot Earnings Surprise
Home Depot, one of the top-10 holdings in ITB, surged 6%
Tuesday. The country's largest do-it-yourself home-improvement
supplier earned 67 cents a share in Q4 vs. 64 cents estimated by
analysts polled by First Call. Earnings climbed 34% year over
year while sales grew 14% to $18.25 billion, topping expectations
of $17.72 billion. Home Depot also said Tuesday it's buying back
$17 billion of its shares and increasing its quarterly dividend
The Standard & Poor's Case Shiller composite index of 20
metropolitan areas surged 6.8% in December year over year. It
rose 2% on a seasonally adjusted basis in Q4 and ended 2012 with
the largest annual gain since 2006.
Nationally, home prices climbed 7.3% year over year in the
fourth quarter of 2012. Home prices soared a whopping 23% year
over year in Phoenix, while ebbing 0.5% in New York.
New York's foreclosure rate, at 6.34% in Q4, far exceeds the
national rate of 3.74%, according to the Mortgage Bankers
The three catalysts that have restored home prices will
continue to support prices in 2013, say Patrick Newport and
Stephanie Karol, economists at IHS Global Insight:
1. The economy is growing and adding jobs.
2. Inventories are dropping because builders are not putting
up homes fast enough to meet underlying demand -- which mostly
consists of replacement demand and demand from newly formed
3. Interest rates are extremely low.
Rising home values are laying the foundation for more economic
growth. Consumers are spending more as they feel wealthier,
thanks to rising home values -- most people's largest asset.
Higher home prices have lifted 1.4 million underwater
homeowners -- those who owed more than their home was worth --
above the water line, benefiting homeowners and lenders.
Improving home values are boosting property-tax revenues for
cash-strapped cities and states.
Homebuilders, construction workers, and furniture and
appliance makers are all benefiting from the rebound.
"Strengthening in home prices is a plus for growth through
various channels, including increased consumer spending because
of wealth and confidence effects, increased incentive to buy
before prices go up some more, and increased incentive to lend
because of less chance of mortgages turning delinquent," Jim
O'Sullivan, chief U.S. economist at High Frequency Economics in
Valhalla, N.Y., wrote in a client note.
New-home sales vaulted 15.6% in January, month over month, to
an annual rate of 437,000 -- eclipsing expectations of
New-home inventories of 4.1 months' supply have dropped
sharply from their high of 12.2 months in 2009.
Median prices ticked up 2.1% year over year in January after
spiking 14.2% in December and 14.1% in November.
"New-home sales are extremely volatile and subject to large
revisions, limiting the information value of any one report,"
O'Sullivan wrote. "Even so, today's data are clearly consistent
with an improving trend. Until today, new-home sales had shown
less improvement than seemed consistent with other related data,
including the homebuilder survey and starts and permits."
Among homebuilders,Hovnanian Enterprises (
) spiked 11%,Standard Pacific (SPF) 9% andKB Home (KBH) 7% on the
Follow Trang Ho on Twitter