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Builders' Bear Market

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Builders' Bear Market


October 8, 2018
Bear profile outside
Photo: Unsplash/Jeremy Vessey

The XHB, the exchange-traded fund that tracks home builder stocks, just had a record losing streak that lasted for 13 sessions in a row, and dropped nine percent in one month.  

This trend signifies the entry into a bear market, according to CNBC. Portfolio manager at S&P Investment Advisory Services Erin Gibbs says that rising interest and mortgage rates are keeping buyers out of the market, "On the other side, homebuilders are facing massive increases in cost, they're really having problems with finding skilled construction workers; they're also having higher material costs as commodity prices go up. So you've got higher costs in building, higher prices from a consumer perspective, and that's just really making the earnings growth tank," and should keep investors away.

They look similarly grim from a technical perspective, said Bill Baruch, president of Blue Line Futures. "Very ugly chart, peaked in January, death cross in April — the selling really though picked up in September as Treasury yields rose. They roared higher, and rising yields are not good for homebuilders, home purchases, and from here I do think the 10-year [Treasury yield] finds a ceiling at 3.25 [percent]," Baruch said on "Trading Nation."

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