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Real Time Insight

The DJ Home Builders ETF (ITB - ETF report) broke out of a downtrend yesterday (see the chart).  The breakout has come on strong volume.  Furthermore, the market was able to hold the August 15 low when volume surged and the ETF closed higher after making a new low on strong volume.  The technical picture seems to leans bullish.

Banks see slower mortgage activity:

The breakout in the housing sector comes at a time when banks are laying off workers in their mortgage units.  At a conference yesterday JP Morgan (JPM) said that U.S. mortgage originations would be down 30% to 40% in H2 2013 compared to H2 2013. Wells Fargo (WFC) also expected originations to decline.

Prices may restrict home buying:

Homebuilder Hovnanian (HOV) said it has been aggressively raising prices, but sales had slowed with strong traffic.  It sees pent up demand and demographics as favorable big picture factors.

Yields remain high:

The 10 year treasury yield is having trouble falling due to the heavy load of supply.  3, 10, and 30 year auctions occur this week, and Verizon debt deal needs final pricing.   The Fed is likely to announce tapering later this month at the FOMC meeting.

RTI Question: Do you think the housing sector has a chance for a meaningful rebound from the May low or is the recent bounce a fade (are you fading or believing the chart)?

Let me know your thoughts below: 

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