| Bullish on Builders? |
| Written by Jonathan Smoke | |
| 01.23.2008 | |
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Discuss this article on the forums. (0 posts) Is it a sign of the apocalypse or simply that a market bottom is in site that the public home builders staged a major rally today? While the Dow Jones Index shrugged off a massive decline to end the day up 2.5%, the public builders were up double digits. XHB, the ETF SPDR from S&P for Home Builders posted a 10.5% increase, while Centex, Pulte and Beazer all posted increases in their share prices over 20%. It may also be a glass half full situation: At $20.50, XHB is up 35% off its 52-week low of 15.22, but it’s still half of its 52-week high.  What drove these increases? A December quarter sales report from Beazer that although still negative, showed some optimism om that cash positions improved. This goes against the general market fear and provided more hope that the builders are not going away any time soon. Ryland also reported but that was after the bell.There was also a J.P. Morgan conference today at which several builders were presenting. Look for transcripts on these presentations next week in our Builder News. The home builders began rallying with the Fed rate cut announcement yesterday. It’s doubtful that the federal funds rate will help improve inventories as much as this rally implies, but it’s hopeful. I think if anything this reflects a shift in sentiment. Even a blog post on Seeking Alpha today by Jim Wiandt admitted that the builders may be oversold. If potential home buyers begin feeling the same way, maybe we can get the weight of the negative psychology off the overall housing market depression we’ve been experiencing. Then we can just deal with post-bubble price declines and inventory problems—i.e., real things we can measure and track progress against. 
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