A Look at the Dow Jones Home Construction Index

January 29, 2008

Check this out. It’s the annual returns of the Dow Jones Home Construction Index:

Dow Jones Home Construction Index Returns

The index is composed of the following 14 homebuilders:



Beazer Homes USA Inc.


Centex Corp.


Champion Enterprises Inc.


D.R. Horton Inc.


Hovnanian Enterprises Inc. Cl A


KB Home


Lennar Corp. Cl A


M.D.C. Holdings Inc.


Meritage Homes Corp.


NVR Inc.


Pulte Homes Inc.


Ryland Group Inc.


Standard Pacific Corp.


Toll Brothers Inc.


I never paid attention to the Dow Jones Home Construction Index until the housing industry blew up. Had I been tracking this index over the last several years, something would have really bugged me. Can you tell what it is? I’ll give you a hint:

Dow Jones Home Construction Index Returns

I’m not an expert on this kind of stuff, but I would think that whenever an index goes up over 95% in one year, it’s got to be an indication that something isn’t right. Of course bubbles are always hard to spot, which is evidenced by the fact that the index continued to go up in 2004 and 2005.

Once again this only proves the power of diversification and asset allocation, which will help you ride out these bubbles.

4 responses to A Look at the Dow Jones Home Construction Index

  1. So now that it has dropped in two of the last three years is this the time to buy again? Or does that just bring it back to where it should have been before the bubble?

  2. Some guy from the Wall Street Journal thinks that homebuilders are worth taking a look at. If you’re interested, let me know and I’ll send you his article. He makes some interesting points.

  3. I’ll take a pass on the homebuilders for now. The financials (the big banks, investment banks, regionals) should turn around in their profitability well before those homebuilders.

  4. Great job compiling this data. Let us revisit this chart at the end of 2008. My guess is that a few of these builders will no longer even be on the list.