There has been a lot of debate about whether housing has bottomed or not. From first hand experience, shopping for homes in NJ, I can tell you, emphatically, that prime real estate is in feverish demand. Literally, quality homes are being sold within 2 weeks of listing, if that long. For the house that I purchased, I actually paid at a premium, setting a new benchmark for the area.
About a month ago, USG announced their price hikes for sheet rock was accepted and absorbed by customers, sending the shares soaring. Then the market softened and housing stocks traded down. But in the big scheme of things, they have been greatly outperforming the SPY for more than a year.
Here is proof.
Using The PPT‘s correlation tool, still in BETA, here is the raw data for residential construction and the spread versus SPY, over a number of time frames.
As you can see, residential construction stocks have outperformed during ALL timeframes.
Here are the stocks that populate the homie index.
I recently got shaken out of cabinet maker MAS. But there are other plays still worth exploring, aside from the obvious listed above.
Lumber stocks, like LL and LPX, are interesting. USG and other material plays like VMC, RPM, BECN, MLM, EXP, TREX, CX and PATK have my interest. And, there are a variety of retail oriented stocks on my radar, particularly BBBY, PIR, FBHS, BLDR, ETH and VAL.
If indeed housing truly makes a comeback, I could see internet related names, like RATE, Z and ANGI, ripping tits to the upside. For the most part, the data isn’t there to support these moves. However, sometimes the market knows the future.