Single-family new home sales began the year with a bang. Sales for January and February soared year-over-year and continued the post-recession breakout that occurred in December, 2014. Sales have trickled downward ever since.
Source: US. Bureau of the Census, New One Family Houses Sold: United States [HSN1F], retrieved from FRED, Federal Reserve Bank of St. Louis, November 26, 2015.
On Wednesday, November 25th, the Census Bureau reported October, 2015 seasonally adjusted annualized new home sales at 495,000. This is a 4.9% year-over-year gain and exactly back to December, 2014’s 495,000 new home sales. This is an important report because it maintains, just barely, the breakout in new home sales. However, the downtrend from the February peak remains in place.
The Spring selling season is now around the corner and expectations are high. Homebuilder sentiment is riding high and housing starts are rising to match. The iShares US Home Construction ETF (ITB) has accordingly risen and even looks ready to challenge the post-recession and 8-year high hit in August. I daresay if not for the August Angst, ITB might still be riding its previous 2015 uptrend.
Source: FreeStockCharts.com
As a result of ITB’s rise ahead of a very likely December rate hike by the U.S. Federal Reserve, I fully expect homebuilder stocks to get particularly sensitive to hints into Spring selling season performance. Such hints would have to come from homebuilder reports.
On a regional level, the apparent decline in Texas starts could portend slower sales growth in the Southern region. I am always watching the economic numbers from this region these days given the collapse in the oil patch. New home sales for the South were up 5.2% year-over-year in October. The Northeast stuck out among the regions with a whopping 60% year-over-year surge. The 40,000 new home sales in the Northeast match levels last seen in January, 2010!
Source: US. Bureau of the Census, New One Family Houses Sold in Northeast Census Region [HSN1FNE], retrieved from FRED, Federal Reserve Bank of St. Louis, November 27, 2015.
Be careful out there!
Full disclosure: long ITB call options