Bank Of America Joins The Home Builders "Turning Sour" Bandwagon
I have been talking about the housing market turn sour for months.
And each time I see Wall Street saying the same thing, it only validates what I started to see many months ago on the charts. Last week, Bank of America analyst, John LovalloMerrill Lynch downgraded Toll Brothers, PulteGroup and NVR and lowered their homebuilding estimates for 2018 and 2019.
"This morning BofA Merrill Lynch's US economics team lowered its 2018-2019 housing starts and new home sales forecasts and thus we slightly temper our macro housing assumptions," analyst John Lovallo said in a note Thursday.
Lovallo downgraded Toll Brothers, PulteGroup and NVR shares to neutral from buy. He also lowered his price target on Toll Brothers to $38 a share from $47. The analyst trimmed his target on PulteGroup shares to $28 from $32 and NVR to $2,850 from $3,060.
The downgrades and Bank of America's reduced estimates for housing starts came after the Commerce Department said Wednesday that building permits fell 5.3 percent last month, more than expected.
Since I dedicated two separate post to Toll Brothers, here’s what John had to say about Toll Brothers.
"While TOL has executed well and is moving down market with more affordable product, its average selling price remains well above peers," he said. "We believe a lower valuation multiple is warranted given potential absorption risk and deteriorating market sentiment, particularly as it relates to interest rate and affordability headwinds."
Speaking of PulteGroup and NVR, I see nothing but further downside on the monthly charts, with a multi-year target of the following:
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
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by rollandthomas
I think this shows some cracks in the economy as mortgage rates, while higher still remain relatively low when compared to other periods in history with the GDP growth we are seeing. I am still paying a mortgage from 2006 at 6.25%! The fact that demand cannot keep up is concerning.
Great comment, it will be interesting to see if the housing market is part of the catalyst that takes the equity markets to multi-years lows...at the moment doesn't appear to have an affect.