The housing market has hit bottom. Problem is, investors already know that.
Two honebuilders reported decent, albeit not spectacular, results Monday morning. D.R. Horton (DHI) posted a profit that beat forecasts. But revenues missed estimates. Meanwhile, Beazer Homes (BZH) reported revenue that exceeded expectations. But its quarterly loss was higher than what analysts were predicting.
Both stocks fell on the news. Beazer got hit particularly hard though, plunging nearly 14% compared to a 3.5% drop for Horton. Traders on StockTwits had a lot of thoughts on why housing stocks were pulling back.
That is bad news, and it can help explain why Beazer's shares were being pummeled. Also, even though sales did top estimates, a loss is still a loss. Horton may have missed on earnings, but it is profitable.
Nonetheless, the whole housing sector was looking weak Monday. The SPDR S&P Homebuilders ETF (XHB) was down about 1%, extending a slide from last week. It makes sense though. Even with the recent slump, this ETF is still sitting on a nearly 50% year-to-date gain. Nearly all housing stocks have enjoyed a huge rebound in 2012 on the hopes that the worst was finally over for the market.
I did a video last week about how all housing stocks could be in for some short-term pain after the outlook from real estate listing site Zillow (Z) was not as strong as analysts were expecting.
Traders are definitely noticing how the sector is losing momentum. Shares of Horton, as well as rivals KB Home (KBH), Lennar (LEN), Toll Brothers (TOL) and PulteGroup (PHM), actually all opened higher Monday and were unable to hang onto those gains.
So the builder pullback should not be a huge surprise. But investors should put things in perspective though. It does look like the recovery in housing is for real.
That's good news for consumers. But for investors, the builder story is running out of steam. Housing stocks need to do more than just confirm that the market is improving. They have to keep beating expectations to justify the huge run-ups they've all had this year.
This article was published in the October issue of Money magazine.
By Paul R. La Monica
Stop me if you've heard this one before: The housing market has finally hit bottom. After years of false hope, that may seem hard to believe. But home sales are indeed rebounding. And prices nationwide climbed 2.5% in June.
Be careful, though, about how you invest in this nascent recovery. Homebuilder stocks have been surging for months MOREameliar - Oct 4, 2012 10:12 AM ET
Shares of homebuilders rallied Wednesday after Toll Brothers reported strong quarterly results and an industry group said home sales rose in July.
The nation's leading luxury homebuilder reported a 46% jump in net income to $61.6 million in the quarter ended July 31. Toll Brothers also said new contracts rose 57%, and its contract backlog grew 44% during the quarter.
Toll Brothers (TOL) stock gained nearly 4% Wednesday. Shares of Hovnanian (HOV), MOREBen Rooney - Aug 22, 2012 1:55 PM ET
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