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Higher Rates Crush Home-builders



July 25, 2013 – Comments (0) | RELATED TICKERS: ITB , IEF , TLT

This morning, many of the leading home-builder stocks are coming under heavy selling pressure. Despite all of the recent news in the media citing a housing recovery the leading housing stocks are retreating. The catalyst for the decline in the home-builder stocks is once again higher bond yields on the 10-year U.S. Treasury Note. Today, the yield on the 10-year note is 2.61 percent. The 30-year fixed mortgage is now 4.37 percent, but any spike in bond yields will increase that rate. Traders that want to track the action in the bond market can follow the iShares Barclays 7-10 Year Treasury ETF (NYSEARCA:IEF), and the iShares Barclays 20+ Year Treasury Bond ETF (NYSEARCA:TLT). When these equities decline it means that yields are rising. It should be noted that both of these equities are falling lower today.

Some of the leading home-builder stocks that are declining lower today include DR Horton Inc. (NYSE:DHI), PulteGroup, Inc. (NYSE:PHM), KB Home (NYSE:KBH), and most other leaders in the sector. Earlier today, DR Horton Inc. reported earnings that are not being well received by investors. The company beat on earnings, but missed on revenues like most other companies that reported so far. Traders and investors can watch for some daily chart support around the $18.00 area. Traders that want to track the entire home-builder sector can follow the iShares Dow Jones US Home Construction ETF (NYSE:ITB). The pattern in the ITB shows daily chart support around the $20.00 level.

Nicholas Santiago

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