After the election of Donald Trump, the National Association of Homebuilders/Wells Fargo confidence survey popped and continued to climb until peaking in December 2017.  Since then, the number has come down,  but it has stayed in expansion mode except the read on traffic.  The June preliminary read came in at 64, slightly below estimates, and down from May’s read of 66.

Potential buyer traffic imploded and has since struggled.  It once again has failed to get back into expansion mode (50+).  Until this happens, I will probably avoid homebuilder names. 

There are several reasons for this problem, and none have anything to do with potential tariffs on Mexico (couldn’t help it).

• Late household formation
• Limited supply of starter homes
• Expensive average selling price
• Lifestyle changes and attitudes toward home ownership                                                            

The big winners are momentum names particularly those under increased government scrutiny.

• Facebook (FB)
• Alphabet (GOOG/GOOGL)

And while there isn’t talk of breaking up the company, Netflix (NFLX) shares are making a long overdue bounce.