New Home Sales growth surpassed economists’ expectations in April and housing stocks barely noticed. The 7.3% new home sales growth in April took the annual pace of sales to 323K, which was solidly above the economists’ consensus forecast for 300K. Yet, the S&P Homebuilders Select Industry Index (NYSE: XHB) declined in value by 0.4% Tuesday. The reason was clear; while the pace of home sales improved, the absolute level of activity remained pitiful.
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New Home Sales Jump 7.3% Ho-Hum?
New Home Sales ran at an annual rate of 323K in April, a notch plus above March’s revised rate of 301K. April blew economists away in actuality, as the highest economist estimate was for 320K. So why then were housing stocks almost unanimously lower Tuesday? It’s because the real estate market is not measured by new home sales alone. The 323K sales pace matched up against existing home sales of 5.05 million. That’s just 6% of total home sales, so when considering that existing home sales fell 0.8% in April, you can understand why investors paid no attention to new home sales growth Tuesday.
The details of the report showed that sales remained 23.1% short of the rate marked in April 2010, but that time period benefited greatly from tax incentive inspired activity. This latest data showed that month-over-month growth in sales was strongest in the Northeast (+7.7%) and the West (+15.1%), with growth also seen in the Midwest (+4.9%) and South (+4.3%). Yet, yearly comparisons were grossly unfavorable in each region.
Because of the increased rate of sales, inventory measured in months improved to 6.5 months in April from 7.2 months in March. Though in April 2010, supply was 6.2 months. There was relatively good news to be found in pricing data, as both the median price and average price of homes sold in April marked increases over March.
Still, the shares of homebuilders fell Tuesday, with Toll Brothers (NYSE: TOL) an exception, rising fractionally ahead of its earnings release. Toll likely also benefited from a burst in home sales ranging in price from $400K to $500K. Shares in Hovnanian (NYSE: HOV) fell 0.8%; KB Homes (NYSE: KBH) declined 0.6%; D.R. Horton (NYSE: DHI) dropped 1.7%; Pulte Homes (NYSE: PHM) fell 0.8%; and Beazer (NYSE: BZH) dropped 1.9%.
Editor’s Note: Article should interest investors in Investors Title (Nasdaq: ITIC), Bank of America (NYSE: BAC), Freddie Mac (OTC: FMCC.OB), Fannie Mae (OTC: FNMA.OB), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), UltraShort Real Estate ProShares (NYSE: SRS), Ultra Real Estate ProShares (NYSE: URE), ING Clarion Global Real Estate Income Fund (NYSE: IGR), Xinyuan Real Estate Co. (NYSE: XIN), Rydex Real Estate Fund H (Nasdaq: RYHRX), T. Rowe Price Real Estate Fund (Nasdaq: TRREX), Toll Brothers (NYSE: TOL), Hovnanian (NYSE: HOV), D.R. Horton (NYSE: DHI), Beazer Homes (NYSE: BZH), Lennar (NYSE: LEN), K.B. Homes (NYSE: KBH), Pulte Homes (NYSE: PHM), NVR Inc. (NYSE: NVR), Gafisa SA (NYSE: GFA), MDC Holdings (NYSE: MDC), Ryland Group (NYSE: RYL), Meritage Homes (NYSE: MTH), Brookfield Homes (NYSE: BHS), Standard Pacific (NYSE: SPF), M/I Homes (NYSE: MHO), Orleans Homebuilders (AMEX: OHB), Vanguard REIT Index ETF (NYSE: VNQ), PNC Bank (NYSE: PNC), J.P. Morgan Chase (NYSE: JPM), Hooker Furniture (Nasdaq: HOFT), Ethan Allen (NYSE: ETH), Pier 1 Imports (NYSE: PIR), Williams Sonoma (NYSE: WSM), Home Depot (NYSE: HD), Lowes (NYSE: LOW), Nasdaq: XNFZX, Nasdaq: FSAZX, Avatar Holdings (Nasdaq: AVTR), Apartment Investment & Management (NYSE: AIV), Equity Residential (NYSE: EQR), Avalonbay Communities (NYSE: AVB), UDR Inc. (NYSE: UDR), Essex Property Trust (NYSE: ESS), Camden Property Trust (NYSE: CPT), Senior Housing Properties (NYSE: SNH), BRE Properties (NYSE: BRE), Home Properties (NYSE: HME), Mid-America Apartment (NYSE: MAA), Equity Lifestyle Properties (NYSE: ELS), American Campus Communities (NYSE: ACC), Colonial Properties (NYSE: CLP), American Capital Agency (Nasdaq: AGNC), Sun Communities (NYSE: SUI), Associated Estates (NYSE: AEC), PennyMac Mortgage (NYSE: PMT), Two Harbors (AMEX: TWO), Simon Property Group (NYSE: SPG).
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