XHB - Homebuilder stocks rally on back of unexpected surge in housing starts

2023-06-20 14:41:57 ET

Homebuilder stocks rallied in Tuesday mid-afternoon trading as traders cheered an unexpected jump in the construction of new homes last month.

Most homebuilding stocks caught bids despite risk-off action in the broader stock market, including Meritage Homes ( NYSE: MTH ), +1.9% , D.R. Horton ( NYSE: DHI ), +1.4% , Toll Brothers ( NYSE: TOL ), +1.4% , Beazer Homes ( NYSE: BZH ), +1.4% , PulteGroup ( NYSE: PHM ), +1.3% , and Lennar ( NYSE: LEN ), +1.2% .

Earlier, the U.S. Census Bureau reported that housing starts surged 21.7% M/M in May to 1.631M, smashing the 1.400M consensus. Building permits also came in strong, climbing 5.2% to 1.491M vs. 1.433M consensus.

The data suggest an improvement in residential construction in the wake of easing supply-chain pressures, as well as cooling materials costs and limit supply in the resale market.

"The sharp rise recovered a large chunk of recent losses in new housing starts, raising the total number of new units to a 1-year high. It's premature to say the housing correction has ended, but the odds certainly look better today. Let's see if there's a follow-through in June," Seeking Alpha analyst James Picerno said in a Twitter post .

Homebuilder exchange-traded funds (ETFs): iShares US Home Construction ETF ( BATS: ITB ), +0.8% , Direxion Daily Homebuilders & Supplies Bull 3x Shares ETF ( NYSEARCA: NAIL ), +2.1% , and SPDR S&P Homebuilders ETF ( NYSEARCA: XHB ), +0.2% .

More on the housing market

• NAHB homebuilder sentiment index in positive after 11 months

• Long-term mortgage rates decrease in anticipation of pause in rate hikes

• Apartment REITs: Gain From Housing Market Imbalances

• Toll Brothers: No Margin Of Safety Even With Uptick In Long-Term Average Housing Starts

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