NEW YORK (TheStreet) -- The housing market has been a bright spot for a slowly growing economy but in my judgment this spotlight has dimmed. My benchmark for the homebuilding industry is the PHLX Housing Sector Index (HGX) (179.51) set a multi-year high at 198.06 on March 20 the day after I wrote, Sell Downgrades Weaken Homebuilder Foundations. HGX is down 9.4% since setting the multi-year high.In the March 19 post I showed that seven of the eight homebuilder stocks I follow had been downgraded to sell with the eighth rated hold. Given the proliferation of sell ratings in this industry my suggestion was to book profits in these names as a "source of funds."
Today the seven homebuilders that were rated sell, have been upgraded; two to buy and five to hold. These upgrades fortify the sinkholes that weakened the homebuilder foundations at the March highs. On Tuesday we learned that housing starts surged 7.0% in March to an annual rate above a million units for the first time since 2008, but this was on the strength of soaring production of multifamily properties. For the homebuilders the more important measure is single-family housing starts, which came in at an annual rate of 618,000 units, just above the 600,000 threshold deemed necessary to sustain the upward momentum for the market for new homes. As a warning, building permits fell 3.9% to an annual rate of 902,000 units. A more important indicator was released on Monday, as the National Association of Home Builders (NAHB) reported that their Housing Market Index slipped to 42 from 44 in April as the spotlight dims below the neutral reading of 50.
Reading the TableOV/UN Valued: Stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine. VE Rating: A "1-engine" rating is a strong sell, a "2-engine" rating is a sell, a "3-engine" rating is a hold, a "4-engine" rating is a buy and a "5-engine" rating is a strong buy. Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage. Forecast 1-Year Return: Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months. Value Level: Price at which to enter a GTC limit order to buy on weakness. The letters mean; W-weekly, M-monthly, Q-quarterly, S-semiannual and A-annual. Pivot: A level between a value level and risky level that should be a magnet during the time frame noted. Risky Level: Price at which to enter a GTC limit order to sell on strength.
D R Horton ( DHI) ($22.14 vs. $24.25 on March 19) has been upgraded to hold from sell. The multi-year high was set at $25.56 on March 20 giving investors the opportunity to book profits at my weekly risky level for that week at $25.02. The weekly chart shifted to negative on April 5 and stays negative with a close this week below the five-week modified moving average at $23.11. My semiannual value level is $20.50 with a quarterly pivot at $22.96 and monthly risky level at $25.56.