- Homebuilders were thought to be at risk from the just-passed GOP tax bill which weakens the value of the mortgage interest deduction. Balancing that out and more, apparently, is the big cut in the corporate tax rate to 20% from 35%. Homebuilders, after all, generate most of their income domestically.
- Bloomberg's Stephen Gandel figures KB Home (KBH -0.1%) would see an 8% boost its bottom line thanks to lower taxes, but wonders where the rest of the company's 30% expected increase in profits next year will come from. Is the housing business going to be that much better?
- After a massive rally this year, the builders trade at 13x next year's expected income vs. 8.5x at the height of the housing bubble last decade. There isn't a lot of room for earnings error.
- The ITB is up 1.25% today and 60% YTD.
- Toll Brothers (TOL +2.2%), Lennar (LEN +1.7%), Pulte (PHM +1.3%), D.R. Horton (DHI +1.2%)
- Now read: Lennar Becomes The Biggest U.S. Homebuilder Following CalAtlantic Acquisition
Original article