“[I]nvestors are looking at new headwinds for the homebuilding sector that have led them to send share prices down sharply in recent months,” writes Dan Caplinger for The Motley Fool. “Yet the bigger question is whether Lennar earnings will see a hiccup in growth from higher mortgage rates, or if home-buyers will prove more resilient in their purchasing activity.”
KB Home and Lennar are expected to post solid earnings, but the stocks look pricey, The Wall Street Journal reports.
“Lower rates for longer clearly are positive for companies that sell people the most expensive purchase of their lives on credit. Even so, there are plenty of other positive factors for homebuilders, from rising prices to increasingly compelling demographics,” Spencer Jakab writes for the WSJ. “The problem is that these appear to have been priced in well before the prospect of less Fed bond buying and rising interest rates appeared. Despite headline after headline about rising home prices and even bidding wars, not a single major homebuilder has outperformed the broad market so far this year.”
Aside from homebuilder earnings, investors will also get several data points on the housing market this week. These include Case-Shiller home prices, new-home sales and pending home sales.
Chart source: chessNwine
Full disclosure: Tom Lydon’s clients own XHB.