Homebuilders Get a Boost Thanks to Mild Market Improvement

Lennar (LEN) is one of the premier home-builders in the United States… the 4th largest by some measures. Investors are cheering a number of improvements, including: (a) the year-over-year cancellation rate coming in at only 20% rather than 32% from the year before, (b) a 29% drop in revenue that produced $911 million, rather than a 33% revenue slide to $863 million, and (c) the first year-over-year increase (3%) in new home orders since the first quarter of 2006.

So this is what improvement looks like? OK.

Industry insiders maintain that this is sufficient evidence of “stabilization.” Industry skeptics argue that sales of new homes plunged in November to the lowest level since April 2009, which may have had a great deal to do with the extension of the homebuyer tax credit from December 09 to April 2010. Moreover, will the demand even be there as mortgage rates keep rising and as the tax credit goes away?

Regardless, Homebuilder ETFs, Financial ETFs and Real Estate ETFs all received a remarkable one-day boost this morning. In addition, all of them are separating themselves above a short-term, 50-day trendline.

Lennar’s “We-Beat-Expectations” Boost to Homebuilder ETFs, Financial ETFs and Real Estate ETFs
						% Gain Through Mid-Day 1/7/10
iShares DJ Home Construction (ITB)						4.8%
SPDR KBW Bank (KBE)						3.9%
SPDR Home Builders (XHB)						3.6%
SPDR Select Financial Sector (XLF)						1.9%
Vanguard REIT ETF (VNQ)						1.3%
iShares Cohens & Steers Realty Majors (ICF)						1.3%

Disclosure Statement: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company and/or its clients may hold positions in the ETFs, mutual funds and/or index funds mentioned above. The company does not receive compensation from any of the fund providers covered in this feature. Moreover, the commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities.