Construction News No Help for Homebuilders ETFs
November 21st at 1:00pm by Tom Lydon
It may seem that way, but homebuilders exchange traded funds (ETFs) and related stocks haven’t hit bottom yet, with some analysts projecting that it will be the middle of next year before the market swings around. Martin Crutsinger for Associated Press reports that the bigger single-family sector fell by 7.3% to an annual rate of 884,000 units, the slowest pace since October 1991. Applications for building permits fell for the fifth consecutive month.
More proof of the sluggish homebuilder market was witnessed as D.R. Horton Inc. (DHI) wrote down a loss in the fourth quarter. The company wrote down the value of unsold homes and land options. This, mixed with tighter lending standards and cautious buyers, isn’t helping to show signs of improvement.
David Koening for Associated Press reports that the National Association of Homebuilders has remained at the lowest level of confidence since 1985, when they began measuring. SPDR S&P Homebuilders (XHB) is down 46.4% year-to-date and iShares Dow Jones U.S. Homebuilders (ITB) is down 52.8% year-to-date.
Freddie Mac (FRE), the nation’s second largest buyer and guarantor of home loans lost $2 billion in the third quarter. Shares fell 30% and fresh capital must be made. Marcy Gordon for Associated Press reports that Goldman Sachs and Lehman Brothers have been called upon for financial evaluation and to think of new ways to generate capital in the near future.
