New home sales soared in May, up 12.2 percent from April. The data sent homebuilder stocks surging. Yahoo Finance Reporter Dani Romero breaks down the rally.
Video Transcript
- The strength of new home sales helping drive shares of homebuilder stocks. Yahoo Finance's Dani Romero joining us now with more on that sector. And Dani, we certainly have seen homebuilder stocks become a favorite here among some investors.
DANI ROMERO: Forget the tech rally. Homebuilder stocks are really the winner here. Confidence among homebuilders is really pushing the sector's index to hit a 52-week high today. The S&P homebuilder ETF is up 28% for the year, and outperforming the S&P 500 index of a 12% gain. So a major win there. And this comes after a Wall Street veteran, Nicholas Colas, says that homebuilder stocks remain cheap to the market.
Other analysts are also echoing the same. Similar sentiment there. For example, one Citigroup analyst says that the housing shortages could provide a multi-year tailwind for homebuilders. The enthusiasm among homebuilders is really being foreshadowed in the latest earnings call. For example, Toll Brothers is capitalizing on the housing shortage right now. The phenomenon, that's what they called it, in the call just a few weeks ago.
And to give you some perspective as well. Inventory of single family family homes is down 19% for both new and resale homes. And so there is a lot of enticement there. Obviously, we do need more homes now. So it really showing in that shortage.
But the final point here is that the market rally isn't just about tech. There are other sectors in the market that are really showing kind of a place for growth and that don't have that above average valuation such as Lennar, Pultegroup, DR Horton. Those stocks definitely have an edge.
- Certainly. Homebuilders positioned well in the housing market. Dani Romero, thanks.
