Week in preview: Expect two big homebuilder earnings reports

Brent Nyitray, CFA, MBA
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Realist real estate roundup, September 16–20 (Part 6 of 7)

(Continued from Part 5)

Next week is all about the FOMC (Federal Open Market Committee) meeting

The FOMC meets on Tuesday and Wednesday, and we should have the announcement on Wednesday afternoon around 2:00 p.m. Taper? By how Much? Which securities? The Fed will also release its forecast of economic activity. The Fed has been consistently over-optimistic on economic growth, and it will be interesting to see how its forecasts stack up to the Street, which is decidedly more bearish. Aside from the FOMC meeting, we do have some important real estate–related data next week, with the NAHB homebuilder sentiment index, existing home sales, housing starts, building permits, and some manufacturing data.

Economic data this week

Monday, September 23

  • Chicago Fed National Activity Index

  • Markit US PMI

Tuesday, September 24

  • Case-Shiller

  • FHFA Home Price Index

  • Richmond Fed

  • Consumer confidence

Wednesday, September 25

  • MBA Mortgage Applications

  • Durable goods

  • Capital goods

  • New home sales

  • Household change in net worth

Thursday, September 26

  • Initial jobless claims

  • Bloomberg Consumer Comfort

  • 2Q GDP (final revision)

  • Pending home sales

  • Kansas City Fed

Friday, September 27

  • Personal income

  • Personal spending

  • PCE

  • University of Michigan Consumer Confidence

Earnings releases this week

Tuesday, September 24

  • KB Home (KBH)

  • Lennar (LEN)

Implications for mortgage REITs

For the mortgage REIT sector, there isn’t much to worry about this week. Non-agency REITs like Chimera (CIM) and PennyMac (PMT) will take note of the home price indices on Tuesday and maybe some of the general economic data. Agency REITs like Annaly (NLY) won’t care. Nothing releasing this week will affect any decision-making at the Fed.

Implications for homebuilders

Homebuilder earnings are back with Lennar (LEN) and KB Home (KBH), which are on November fiscal years. Last time around, the increase in interest rates was too recent to affect their quarters. We’ll see if traffic is starting to fall off as rates rise, particularly at the lower price points. Aside from the earnings reports, the builders will focus on the home price indices and the income numbers. The builders are probably not all that sensitive to quantitative easing, but they will take a close look at any changes to the Fed’s economic forecasts. Builders are highly cyclical stocks, and signs of economic weakness are negative for them.

Continue to Part 7

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