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 Home buyers returned from summer vacations to lower mortgage rates
and increasing rents, and may have moved back into the market after
staying away in August. Shares in the sector fell in mid-to-late
September after August data missed expectations.
The NAHB (National Association of Homebuilders) housing market index
measuring seller sentiment is due out Monday, to be followed during
the week by data that includes building permits and housing starts,
mortgages, and home prices and sales.
While the PHLX index of housing stocks has risen more than 6.4
percent so far this year, it has fallen 3.6 percent in the last
month. The index fell 9.9 percent from Sept. 16 to Sept. 29, the
week when August data was released.
Strength in June and July housing data may have boosted investor
expectations to unrealistic levels for August, typically a slower
month for housing, according to Susan Maklari, housing equities
analyst at UBS in New York.
Since the Labor Day holiday in early September, Maklari has seen
signs of improvement in channel checks around the country.
"You're going to see growth year-over-year coming through. It's
probably going to be in line with what people would expect for
September, maybe a little bit better than that," she said.
Maklari cited strength in western U.S. markets such as California,
where the technology sector is boosting employment and salaries.
Weaker markets include the Washington D.C. area, where stringent
government spending is causing uncertainty among potential home
buyers. In Texas sales have weakened for homes in the $350,000 and
above range, but demand is strong for homes priced at $200,000 and
below, according to the analyst.
Mortgage rate increases in both June and July, when rates for
30-year fixed-rate loans were at 4.25 percent, likely helped to
dampen sales in August, according to Sameer Samana, global
quantitative strategist at Wells Fargo in St. Louis. But he noted
that the rate has since come down to 3.88 percent, which could
influence people who were close to but on the fence about buying a
home.
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"That's one of the things that could lead to an upside surprise in
next week's numbers," said Samana.
Many potential buyers also closely listen to comments by Federal
Reserve Chair Janet Yellen about the U.S. economy and short-term
interest rates. Since many economists had expected a rate increase
announcement on Sept. 17, this may have encouraged some buyers
anxious to lock in a lower rate, said Jack Ablin, chief investment
officer at BMO Private Bank in Chicago.
Not everyone is as upbeat. There has been a noticeable uptick in
options traders' appetite for owning protection on the SPDR S&P
Homebuilders ETF, down 2 percent from mid-June.
But even an eventual increase in rates may not dim housing prospects
quickly, if it is accompanied by positive talk from the Fed, said
Samana.
"If they come out with a confident positive message when they start
to raise interest rates a lot of folks might take that as a sign of
confidence, he said.
(Reporting By Sinead Carew and Saqib Ahmed in New York; Editing by
Steve Orlofsky)
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