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This Is Why Homebuilder Stocks Are Hammering Bears This Morning

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Yes, the New Home Sales headline report came in better than expected, but the details show the real story of why homebuilder stocks are making a move this morning.

At first blush, new sales were moderately higher than anticipated. Bloomberg says their survey of economists anticipated a rise in new home sales to a 300,000 annual pace while the headline figure came in at 329,000. Fine, but is that enough to send stocks like KB Home (KBH), Pulte Group (PHM), DR Horton (DHI), Lennar (LEN), Ryland (RYL) and Toll Brothers (TOL) up this morning?

Not exactly. Just look at this chart showing the annualized number of new home sales dating back to 1995. LOL!



Feel better? Feel bullish? Of course not... not in the historical sense, anyway. Still, the details of the New Home Sales report shows three improvements that have bears on the run:

1) Revisions (a mere 4,000) were only modest, while throughout the bottoming process for housing revisions have been a kick in the teeth just about every month.

2) The months' supply of housing on the market improved dramatically, from 8.4 months' supply in November to just 6.9 months' supply in December.

3) Median price jumped from $215,500 in November to $241,500 in December.

And that's why bears are nervous, shorts are covering and the stocks are up right now.
POSITION:  No positions in stocks mentioned.

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