Homebuilders and Related Suppliers Are Set to Build a Rally

NEW YORK (TheStreet) -- Each month I provide updated "crunching the numbers" tables for the 19 components of the PHLX Housing Sector Index after the release of the National Association of Home Builders Housing Market Index and the release of housing starts. The housing sector index is down just 0.9% year to date.

The 11 homebuilders in the housing index declined after weaker than expected housing data in June trading and the housing index set its 2014 low on July 31. Better than expected data reported this week helped homebuilder shares recover.

The biggest winners among the homebuilders since I wrote about them last month are Standard & Pacific (SPF) and M/I Homes (MHO) up 4.5% and 3.4%, respectively.

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Better performances come from three companies that provide products and services to the housing market. Home improvement and building products company Masco (MAS) is up 13% since July 24. The provider of private mortgage insurance Radian Group (RDN) is up 7.7%. Timber and forest products company Weyerhaeuser (WY) has a gain of 6.4%.

Here are the bullish data releases for housing:

On Monday, the National Association of Home Builders Housing Market Index rose two points to 55 in August.

On Tuesday, the U.S. Deportment of Housing and Urban Development and the U.S. Census Bureau reported housing starts rose 16% in July to a seasonally-adjusted 1.093 million units. The important component for homebuilders is single-family housing starts, which popped 8.3% in July to 656,000 units.

 

The above graph presents the NAHB Housing Market Index and single-family home starts. Even after this good data I still view the market for new homes stalled at 60% of potential.

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At 55, the HMI is above the neutral 50 but below 60 on a scale of 00 to 100.

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