Homebuilders Are Soaring... But Investors Hate Them

This is easily one of the biggest sentiment disconnects I've seen in my career... Now, more than at any time since 2008, folks are calling for a housing crisis. [Chaikin PowerFeed]( Homebuilders Are Soaring... But Investors Hate Them By Marc Gerstein, director of research, Chaikin Analytics This is easily one of the biggest sentiment disconnects I've seen in my career... Now, more than at any time since 2008, folks are calling for a housing crisis. And just about everyone is certain that home prices – and even rents – will fall in the months ahead. At the surface level, it's easy to see why... Nick Gerli is the CEO and founder of real estate tracking company Reventure Consulting. And on Tuesday, he posted the following message on Twitter about KB Home (KBH)... [Chaikin PowerFeed] As Gerli noted, KB Home is one of the biggest homebuilders in America. It's a great indicator of the space. So when you see a huge shift like that, it does sound "scary" at first. It's no wonder many consumers think the housing market is on the edge of collapse. But as I'll explain today, the Power Gauge sees this situation in a different way. And you might be surprised to find out how it views the homebuilder industry as a whole... Recommended Links: [Here's What You Missed Last Week]( The man who nailed the '20 and '22 crashes explains why a rare event is coming to stocks this year, and how it could open the biggest money-making opportunity in 20 years. You could have doubled your money 34 times with his picks, so be sure to grab his FREE recommendation for 2023 while it's still online today. [Click here to watch now](. [This is what I just told the Pentagon]( While everyone's worried about inflation, cryptocurrencies, and a looming recession, professor and forensic accountant Joel Litman just delivered an even more surprising warning when he met with top military brass at the Pentagon last month. [Here's what Joel says will happen to the market over the next 90 days](. Without question, rising interest rates have changed the dynamic in the housing market. As you just saw with Gerli's post, homebuyers' cancellations surged to record highs last year. But we need to consider a key point about that stat... You see, buyers of new homes typically lock in their interest rate around 60 days before closing. But they often make the initial agreement to buy more than a year in advance. In a falling-rate environment, that's great for the homebuyer. It means that the expected payment on their mortgage will just get lower and lower as time passes. On the flip side, higher rates mean higher interest payments. That should clue you in to what happened with KB Home... As we all know, interest rates soared over the past year. They went from record lows to their highest levels since the mid-2000s. That can throw off anyone's budgeting plans... The table below gives you an idea. It compares the monthly payments for a 30-year fixed-rate mortgage on a $300,000 home at interest rates of 2.9% and 6.9%. Check it out... [Chaikin PowerFeed] That's a big difference! So it's no wonder why so many folks walked away from their potential home purchases. As the example shows, expected monthly payments soared by as much as 58% in some cases. But importantly... this recent trend doesn't mean homebuilding is completely finished. In fact, the Power Gauge sees an incredible opportunity in this space right now... KB Home is currently rated as "neutral" in the system. But when we take a step back and look at the homebuilding industry as a whole, it's a much different story... The iShares U.S. Home Construction Fund (ITB) is rated as "very bullish" today. This exchange-traded fund ("ETF") holds a basket of about 50 U.S. homebuilders and related stocks. So it's a great way for us to "check the pulse" of the entire industry. In addition to ITB's "very bullish" overall rating, the Power Gauge is also optimistic about many of the ETF's holdings. Today, 21 stocks within ITB are "bullish" or better. And only four stocks earn "bearish" or worse ratings. (The rest fall into the "neutral" zone.) Plus, ITB is already outperforming the market. It's up roughly 10% in the past six months. In comparison, the S&P 500 Index is down about 2% over that span. So if I were you, I wouldn't join the folks expecting a massive drop in home prices today. Sure, higher rates could continue to put pressure on the housing market. But that doesn't mean the industry is completely finished. We've finally flushed out the mismatch between homebuyers with low expected payments and the reality of today's actual payments. And that's setting up a bright future. The Power Gauge sees that. So I recommend keeping an eye on homebuilders, too. Good investing, Marc Gerstein Market View Major Indexes and Notable Sectors # Hld: Bullish Neutral Bearish Dow 30 -0.67% 10 15 5 S&P 500 -0.70% 122 279 99 Nasdaq -0.98% 29 51 21 Small Caps -0.96% 516 996 380 Bonds -0.63% Energy +1.21% 6 17 0 — According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks are somewhat Bullish. Major indexes are mixed. * * * * Top Movers Gainers [rating] CMA +5.91% [rating] MTB +5.49% [rating] TFC +4.31% [rating] EXPE +3.08% [rating] NOW +2.94% Losers [rating] ENPH -10.92% [rating] SEDG -10.32% [rating] NTRS -8.60% [rating] GNRC -7.54% [rating] FSLR -7.07% * * * * Earnings Report Reporting Today Rating Before Open After Close STT SWKS HBAN, RF, SLB No earnings reporting today. Earnings Surprises [rating] NFLX Netflix, Inc. Q4 $3.10 Beat by $0.94 [rating] NTRS Northern Trust Corporation Q4 $1.66 Missed by $-0.15 [rating] PPG PPG Industries, Inc. Q4 $1.22 Beat by $0.09 [rating] FITB Fifth Third Bancorp Q4 $1.04 Beat by $0.04 [rating] FAST Fastenal Company Q4 $0.43 Beat by $0.01 * * * * Sector Tracker Sector movement over the last 5 days Energy -0.29% Health Care -1.19% Communication -1.32% Information Technology -1.72% Discretionary -1.96% Real Estate -2.51% Materials -2.55% Financial -2.98% Staples -3.13% Utilities -3.87% Industrials -4.83% * * * * Industry Focus Biotech Services 53 83 16 Over the past 6 months, the Biotech subsector (XBI) has outperformed the S&P 500 by +5.08%. Its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #6 of 21 subsectors and has moved up 4 slots over the past week. Top Stocks [rating] ITOS iTeos Therapeutics, [rating] KNSA Kiniksa Pharmaceutic [rating] SNDX Syndax Pharmaceutica * * * * You have received this e-mail as part of your subscription to PowerFeed. 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