Data justifies strength in homebuilder stocks

From John S. Tobey:

The homebuilding market continues to look healthy. Monday’s (6/17) release of the Housing Market Index by the National Association of Home Builders (NAHB) is the latest. Each month NAHB surveys homebuilders using a few, sound questions that address visible conditions as well as homebuilders’ sense of what is coming over the next six months.

From the NAHB website:

The Housing Market Index (HMI) is based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. The survey asks respondents to rate market conditions for the sale of new homes currently and in the next six months as well as the traffic of prospective buyers of new homes.

How best to view and interpret this data

Typical of monthly data reports, comparisons are most often with the previous month. The problem with all housing related reports is that there is a high degree of volatility that seasonal adjustments cannot remove. Moreover, housing trends tend to be long, so monthly wiggles are more often noise than information.

Therefore, longer periods are a better way to view the trends as well as the effects of atypical developments (for example the fourth quarter 2018 bear market and the Federal Reserve’s interest rate actions).

The SPDR S&P Homebuilders ETF (XHB) . Year-to-date, XHB has declined -6.37%, versus a 10.01% rise in the benchmark S&P 500 index during the same period.

XHB currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #32 of 41 ETFs in the Consumer-Focused ETFs category.

This article is brought to you courtesy of Forbes.