Builder ETFs Jump on Pulte, Ryland, Pending Home Sales
April 26th 2012 at 10:11am by John Spence
Homebuilder ETFs rallied Thursday after upbeat earnings from top holdings Ryland Group (NYSE: RYL) and PulteGroup (NYSE: PHM). Pending home sales also provided a lift to the sector funds.
The National Association of Realtors on Thursday said pending home sales rose 4.1% in March to the highest level since April 2010.
“The housing market has clearly turned the corner. Rising sales are bringing down inventory and creating much more balanced conditions around the county, which means home prices will be rising in more areas as the year progresses,” said Lawrence Yun, NAR chief economist.
SPDR S&P Homebuilders ETF (NYSEArca: XHB) and iShares Dow Jones US Home Construction (NYSEArca: ITB) added about 2% in morning trade. ITB is up 24.6% year to date, compared with an 11.3% gain for the S&P 500, according to Morningstar. Housing ETFs are outperforming on hopes the U.S. residential real estate market is finally on the mend.
In homebuilder earnings, Pulte reported a smaller first-quarter loss while orders for new homes increased 15% from the year-earlier period. Revenue was better than expected “primarily driven by increased sales into the move-up market, translating into a 5% increase in average selling prices,” Williams Financial Group said in a note.
Separately, Ryland said new orders increased about 46% from the year-ago quarter.
The builder “missed on revenue but delivered slightly better than expected earnings per share, with solid growth across all reporting segments in orders, backlog and deliveries,” Williams said.
Ryland shares rallied 9% while Pulte added 7% at last check after the companies announced their quarterly results.
Meanwhile, mortgage rates remain attractive. “Mortgage rates remained near record lows in the week ending April 26, with the 30-year fixed-rate mortgage average declining to 3.88% from 3.90% in the prior week, Freddie Mac said Thursday in its weekly report,” MarketWatch said.
SPDR S&P Homebuilders ETF
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