provided the foundation for Wednesday's stock market rebound
afterLennar 's (
) first-quarter profit beat Wall Street forecasts.
Thanks to rock-bottom interest rates and towering rents, new
permits for home construction climbed to their highest level
since 2008. But they're still a far cry from normal levels and
the bubble-era high, presenting plenty of room for
IShares Dow Jones U.S.
Home Construction (
) climbed 2.91% to 24.71 -- the highest price in more than five
years. Among all stock ETFs, it carries the highest IBD Relative
Strength and Accumulation/Distribution Ratings of 89 and B. That
shows it's outpaced 89% of the market in the past 12 months and
institutional investors are heavily buying shares with very
little selling. Yet it's only halfway to regaining its 2007
SPDR S&P Homebuilders (
) jumped 2.42% to 30.52. Aside from homebuilders, it includes
home furnishing retailers such asPier 1 Imports (
),Bed Bath & Beyond (
) andSelect Comfort (SCSS).
Lennar -- the third-largest U.S. homebuilder and a major
holding in all three ETFs -- vaulted 5% to 43.41, its highest
level in nearly six years. It broke out of a two-month long cup
base with a 43.32 buy point in double average volume. Q1 earnings
and sales jumped. (
.) Orders sprang 34% from the year-ago period.
JPMorgan analysts maintained their overweight rating noting
that shares do not fully reflect the company's long-term earnings
potential. S&P Capital IQ rated shares a hold, contending
they trade high above historical averages although in line with
February's single-family housing starts, reported Tuesday,
ticked up 0.5% over January and an eye-popping 31.5% from the
year-ago month to 618,000 units annualized. They've rebounded 75%
from their historic low but are still 46% below normal levels,
suggesting significant upside potential for the recovery,
according to Credit Suisse.
Credit Suisse analysts forecast total 2013 housing starts to
climb 20% year over year to 935,000 units. They expect a 19%
increase next year to 1,115,000 units, which would still be 53%
below the peak.
February housing permits added 2.7% over the prior month and
25.5% year over year to 600,000. They've advanced for 11 months
in a row and remain 67% below their September 2005 high.
Meanwhile, existing home inventories in January fell 25.12%
year over year and for a fifth straight month to their lowest
level since December 1999, according to Gilford Securities.
In most key markets, "the supply of existing inventory is at
or below six months, a historically sweet spot for new home
demand and pricing power," Jeremy Pichot, an analyst with
Gilford, wrote in a research report Monday. "Homebuilders are in
the beginning of a multiyear up cycle with significant earnings
leverage and book-value growth that will make current valuations
KB Home (KBH) is on deck to release first-quarter results
before the market opens Thursday. Credit Suisse expects Q1 orders
to surge 33% year over year, which is conservative after KB said
orders vaulted 54% year over year through Jan. 18. Its stock rose
3% to 21.57 Wednesday.