Option Investor
Market Updates

Housing Starts Slump

Printer friendly version

Housing starts decline by 6.9% in August to 1.53 million. That puts new home starts below the 12-month average. New permits also declined as builders brace for a reduction in demand.

DJ US Home Construction Index Daily Charts

Investors have also braced for a reduction in housing demand by selling homebuilding stocks. The US Home Construction Index ($DJUSHB) has dropped below the 200-day moving average and support at 223. 175 might be the level where this index finally finds support.

Pulte Homes Weekly Chart

Pulte Homes (PULT) was in trouble two weeks ago when it lost its up trend, but was clinging to support at $32. This week's $5 plunge has dropped the stock below its next support level at $28. Next up looks to be support at $23.25, $3.85 away.

Beazer Homes Daily Chart

Last week Beazer Homes (BZH) was clinging to support at $55, but this week's 18.25% drop has removed that support level. The 200- day moving average and 50% retracement level have also been taken out. $40.85, a 61.8% retracement of the March 2000 to July 2001 gains, looks like a possible downside target.

Clayton Homes Daily Charts

Even the manufactured homes aren't immune to the sell off. Clayton Homes (CMH) has fallen $2.75, or 19.6%, this week, but has managed to find support today at $11.23, the 61.8% retracement.

The housing starts data that was released today was prior to last week's events. Most likely housing demand will continue to weaken. Anytime the question of the economy came up, the health of the housing sector was the one bright spot everyone referred to. One report doesn't paint the whole picture, but the housing market will be closely watched going forward.

Jeffrey Canavan
Assistant Analyst

Intraday Update Archives