By Gareth Soloway on April 23rd, 2010 11:58am Eastern Time
Housing stocks are rocketing higher today on the back of New Home Sales data. The Commerce Department alerted the markets that sales of new homes jumped 27% in March to a seasonally adjusted annual rate of 411,000. This is the biggest percentage jump in sales since April 1963.
Housing stocks shot higher with Lennar Corporation (NYSE:LEN), Toll Brothers, Inc. (NYSE:TOL) and Beazer Homes USA, Inc. (NYSE:BZH) leading the way. While this might make the average consumer feel another piece of the puzzle is complete for the recovery, caution must be used. The new and current home buyer tax credit is set to expire Friday. This is causing a rush to buy a home for many and creating an artificial jump in home sales that may not truly reflect a real recovery. Real estate friends have mentioned that as many as five home sales have occurred in the last week or so just purely based off the tax credit coming to an end.
This fact tells us that while the New Home Sales data will be pumped on the nightly news and across the media, it is likely to drop slightly next month as only half of April will have the push, then the following month it is likely to fall off a cliff. Taking a look at the markets today, it seems like the markets realize this as well. On that spectacular New Home Sales number, the markets are actually flat to down slightly today.
Housing stocks like LEN, TOL and BZH have all had big runs in recent days. In addition, technically speaking, there is a possible topping tail forming on all three of them today. This could be marking the top for these stocks in the near term. For more information, guidance on the markets, insight, calls and education, join the Research Center.
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
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