Volatile Homebuilders Could Move on Data, Tax Policy

• By the tickerspy.com Staff
• On 12:25 pm EDT, Thursday October 8, 2009

Housing stocks are tough to follow these days, swinging rapidly on economic data and mixed opinions among experts.

Homebuilders are surging across the board today after Treasury Secretary Geithner said the housing markets are showing "broad signs" of improvement, according to coverage by Bloomberg. Also helping the sector is today's report by the Labor Department that initial jobless claims dropped more-than-expected to a nine-month low last week.

According to The Wall Street Journal, economists generally expect unemployment to rise next year. Former Federal Reserve chairman Alan Greenspan told The New York Times he expects the current 9.8% unemployment rate to rise to double-digits.

While the prospect of higher unemployment is bad news for the Homebuilder Stocks Index, an extended tax credit program could mean more room to the upside. According to a report in yesterday's Times, Democratic Congressional leaders are working with the White House to extend the $8000 first-time home buyer credit and possibly expand it to current homeowners as well.

Champion Enterprises (NYSE: CHB - News) is leading the homebuilder rally today with a 12% gain. Close behind are KB Home (NYSE: KBH - News), Brookfield Homes (NYSE: BHS - News), and Lennar (NYSE: LEN - News), all up by 8% or more.

M/I Homes (NYSE: MHO - News) and Hovnanian Enterprises (NYSE: HOV - News) are now up by more than 22% over the last week. Meanwhile, Skyline (NYSE: SKY - News) and Cavco Industries (NASDAQ: CVCO - News) are now the only homebuilder stocks left in the red for the period.

Pulte Homes (NYSE: PHM - News), DR Horton (NYSE: DHI - News), and Toll Brothers (NYSE: TOL - News) are still down by -10% or more over the last month despite daily runs of more than 5%.

As new economic data comes in, and the government considers further improvement efforts, investors should keep a close eye on the recently volatile Homebuilder Stocks Index.

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