Todd Gordon of TradingAnalysis.com and Gina Sanchez of Chantico Global discuss homebuilder stocks like KB Home with Mike Santoli.
Homebuilder stocks get crushed, but one analyst says the chart looks so bad, it’s good from CNBC.
Homebuilder stocks are getting hammered.
The group fell Friday for the sixth time in seven sessions, bringing the total year-to-date losses for the XHB, a popular homebuilder-tracking ETF, to 23 percent. While some investors are avoiding homebuilders amid rising interest rates that traditionally serve as a headwind for the economically sensitive group of stocks, others say evidence is mounting for a bounce.
The XHB began accelerating its losses this year once the U.S. 10-year Treasury yield broke above 2.8 percent, said Todd Gordon, technical analyst and founder of TradingAnalysis.com. From there, homebuilders’ move lower has been quite sharp, but he sees support forming on the chart.
“As long as you’re above $31 to $32 [per share], technical support is in place, and we can continue higher. We’re already pushing up at the $34 mark. Technically, that’s good in contrast to some name-specific damage that we’ve seen,” Gordon said Thursday on CNBC’s “Trading Nation, ” referring to levels on the XHB.
Barring an unforeseen spike in rates, Gordon said, he sees the group heading higher from here. He’s not betting on a rapid rate rise, either, he said; bond volatility has fallen.
Still, others are more cautious given the Federal Reserve’s monetary tightening path.
“You’re finally seeing some wage growth. That should be good news for homebuyers, but here’s the problem. We have been in an interest rate hiking cycle, and as we continue to see the economy continuing to grow, that hiking is likely going to continue and interest rates really affect first-time homebuyers. And that’s actually been the focus for most of the homebuilding market right now. So they’re really sensitive to very small moves in interest rates, because it does move their monthly mortgage, and that does matter to first-time homebuyers. So I think that’s a big problem,” Gina Sanchez, CEO of Chantico Global, said Thursday on “Trading Nation.”
Still, she said relief could be in store for housing stocks due to falling costs. Lumber prices have crashed this year, Sanchez pointed out, and that should help margins. Land supply is also limited relative to demand, so that should also be a boon to the group.