Housing Comeback in 2013?

RELATED QUOTES

SymbolPriceChange
PCL0.00
UTX102.35+0.12
LEN42.72-0.23
DHI30.02+0.10

Recent data relating to new home sales, housing permits, declining inventory levels, and rising housing prices are sufficient indicators of an improving U.S. housing market.

Housing Collapse

The sector suffered since 2006 when house prices had fallen by more than 30% across the nation. The decline had been twice as much in some of the metros. Declining house property ate away home equity, wiping out trillions of dollars held by individual households.

Delinquency and foreclosure rates on home mortgages were at an all time high, at levels unseen since the Great Depression. Recessionary conditions along with rising foreclosures in recent years caused the national homeownership rate to decline from its 2004 peak of 69% to under 66% in 2011.

Recent Trends

Fast forward to 2012 and conditions have improved remarkably. To get more specific, data released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development relating to sales of new single-family houses in October 2012 was at a seasonally adjusted annual rate of 368,000, up 17.2% from the October 2011 estimate of 314,000.

Moreover, the median sales price of new houses sold in October 2012 was $237,700; the average sales price was $278,900 up 8.0% year over year.

The data also shows that there are currently 4.8 months of supply of new houses (thanks to strong sales) on the market at the current sales rate and 5.4 months of supply of existing homes. For reference, a healthy market would be between 5 and 6 months of supply.

Meanwhile housing permits, which are the best short-term indicator of future housing starts, also show a strong run up. As of October 2012, housing permits, at 679,900, posted an increase of 33% year over year.

Inventory levels for October 2012 were also low. Five-year data also suggests that inventory for new homes as well as existing homes has been declining.

Moreover, housing prices have been on an upward trend. S&P/Case-Shiller Home Price Index – the gold standard for housing price index – demonstrated a rise in home prices in the third quarter of 2012. The index was up 3.6% year over year and 2.2% sequentially. A consistent rise in home prices for six months through September 2012 is a sufficient pointer that the housing market recovery is in positive territory.

Further, the National Association of Home Builders/Wells Fargo Housing Market Index (:HMI), which shows builder confidence in the market for newly built, single-family homes, posted a solid, 5-point gain to 46 for November. This marks the seventh consecutive monthly gain in the confidence gauge and brings it to its highest point since May 2006. Though any reading under 50 still indicates that the builders see conditions as poor, a substantial progress can be witnessed since this time last year, when the HMI stood at a paltry 19.

Tailwinds

Other tailwinds driving the sector are low long-term mortgage interest rates which translate into higher affordability and a recovery in the unemployment rate which narrowed down to 7.7% in November 2012 from the highs of 10.0% in the recent past. These factors are now expected to trigger a renewed demand for houses.

Aiding Economy

Historically, residential investment, of which new home construction is the most important part, has been the catalyst that has pulled the economy out of the woods.  The building of every new single-family home creates roughly three new jobs. 

A recovery in housing will not only benefit homebuilders like Lennar Corporation (LEN) or D.R. Horton Inc. (DHI), but all other businesses that go into producing a home. These include lumber, produced by companies like Plum Creek Timber Co. Ltd. (PCL), concrete, lighting fixtures, heating, and cooling equipment providers like United Technologies Corp.  (UTX) and the like. Jobs are also created for service providers such as real estate agents, lawyers, and brokers.  

In addition to generating employment, housing generates revenue for the government by way of property tax, which helps in the funding and flourishing of local schools and communities.

Residential investment in the Gross Domestic Output which has averaged at 2.7% year to date is expected to increase to more normal levels of 4.5% to 5% of GDP over the next couple of years, if the current recovery gathers momentum.

Putting It Together....

The recent trends backed by adequate data reinforce our view that the housing market is on its way to recovery. However, a big if remains in place in case the U.S. fails to address the Fiscal Cliff or suffers from a slowing global economy in the wake of the European debt crisis.

Key data relating to homebuilder sentiment index, November Housing Starts numbers and Existing Home sales data, due this week will provide further clarity to the housing market movement.

Read the Full Research Report on PCL

Read the Full Research Report on UTX

Read the Full Research Report on LEN

Read the Full Research Report on DHI

Zacks Investment Research



More From Zacks.com

--

Get stories like this on the Yahoo app and discover more every day.
Download it now.
Loading...
  • German lawmakers to quiz ECB's Draghi over monetary policy Reuters - 10 minutes ago

    European Central Bank President Mario Draghi is set to face tough questions from German lawmakers on Wednesday about the bank's ultra-loose monetary policy, just as the ECB is considering even more stimulus to revive inflation. Relations have … More »

  • Dollar slightly higher after Clinton bests Trump in debate AFP - 17 minutes ago

    The US dollar earned a boost Tuesday after Hillary Clinton, who is favored by Wall Street, got the best of rival Donald Trump in the first US presidential debate. Most analysts scored the Democrat, widely ... … More »

  • Onetime rising hedge fund star John Thaler considers comeback Reuters - 17 minutes ago

    John Thaler, the tech, media and telecom stock specialist who shut down his hedge fund firm JAT Capital Management LP in 2015, is considering a return to managing other people's money, including launching a new hedge fund, two people familiar with … More »

  • Business Highlights Associated Press - 32 minutes ago

    ___ Unhappy Target customers send strong message on pill bottles Target's pharmacy customers are finding a change in pill bottle design hard to swallow. After CVS began operating Target's drugstores earlier ... … More »

  • ECB'S Lane says up to supervisors to mitigate risks of low rates
    ECB'S Lane says up to supervisors to mitigate risks of low rates Reuters - 37 minutes ago

    Ultra-low European Central Bank interest rates could lead to excessive risk-taking but it is up to supervisors to mitigate these risks as ECB policy is clearly doing the job intended, Governing Council member Philip Lane said on Tuesday. Lane, the … More »

  • Women petition UN chief to pursue Korea peace treaty
    Women petition UN chief to pursue Korea peace treaty AFP News - 40 minutes ago

    A hundred prominent women from 38 countries have directed a petition to UN Secretary General Ban Ki-moon urging him to fulfill his promise to achieve a permanent peace to end the Korean War. In a letter made public on Tuesday, a diverse group of … More »

  • Justice Dept. top national security official to leave post Associated Press - 44 minutes ago

    The Justice Department's top national security official is leaving his position next month, the department announced Tuesday. John Carlin, who has led the department's national security division since ... … More »

  • SpaceX chief envisions 1,000 passenger ships flying to Mars Associated Press - 55 minutes ago

    SpaceX founder Elon Musk envisions 1,000 passenger ships flying en masse to Mars within a century, "Battlestar Galactica" style. During a speech Tuesday in Mexico, Musk outlined his plan to establish ... … More »

  • Oil down 3 percent as Saudi, Iran dash hopes for an Algiers deal
    Oil down 3 percent as Saudi, Iran dash hopes for an Algiers deal Reuters - 1 hour 3 minutes ago

    Oil fell about 3 percent on Tuesday after Saudi Arabia and Iran dashed market hopes that the two major OPEC producers would find a compromise this week at meeting in Algiers to help ease a global glut of crude. Saudi Energy Minister Khalid al-Falih … More »

  • Iraq mediating between Saudis and Iran to support oil prices Reuters - 1 hour 4 minutes ago

    Iraq is carrying out a mediation between Saudi Arabia and Iran to bring about an agreement that would lift crude prices, at a meeting of crude-producing nations in Algiers, Iraqi Oil Minister Jabar Ali al-Luaibi said on Tuesday. Iran on Tuesday … More »

  • The Ford Focus RS was my favorite new track car — but now I like it on the road
    The Ford Focus RS was my favorite new track car — but now I like it on the road Business Insider - 1 hour 14 minutes ago

    Matthew DeBord/BI Behold, the hottest hatch? Ah, the … Continued The post The Ford Focus RS was my favorite new track car — but now I like it on the road appeared first on Business Insider. … More »

  • WHY IT MATTERS: Debate showed how divisive trade has become
    WHY IT MATTERS: Debate showed how divisive trade has become Associated Press - 1 hour 14 minutes ago

    THE ISSUE: Free trade has become a ripe target in the U.S. presidential campaign. At Monday's debate with Hillary Clinton, Donald Trump declared the need to renegotiate trade deals because U.S. trading ... … More »

  • Dutch court ruled in KLM favour in pension dispute - Air France-KLM Reuters - 1 hour 24 minutes ago

    Franco-Dutch airline Air France-KLM (AIRF.PA) said on Tuesday an Amsterdam court had ruled in favour of its Dutch arm KLM in a pension dispute with a pilots' union. The Dutch Airline Pilots Association, which represents 98 percent of KLM's pilots, … More »

  • How the Dow Jones industrial average fared on Tuesday Associated Press - 1 hour 26 minutes ago

    U.S. stocks closed higher after a survey showed consumer confidence is at a nine-year high, a sign Americans will keep spending in the months to come. Technology and consumer stocks made the largest gains. ... … More »

  • U.S. Treasury’s Lew sees no Fed surprises for emerging markets Reuters - 1 hour 32 minutes ago

    U.S. Treasury Secretary Jack Lew said major emerging market countries should be better able to anticipate a U.S. interest rate hike because of the Federal Reserve’s clear communications, a recapitalised International Monetary Fund and efforts to … More »

  • The Porsche 911 has convinced me that it’s the greatest car ever made
    The Porsche 911 has convinced me that it’s the greatest car ever made Business Insider - 1 hour 39 minutes ago

    Matthew DeBord/BI Want. If you want to, you … Continued The post The Porsche 911 has convinced me that it’s the greatest car ever made appeared first on Business Insider. … More »

  • Global stocks gain after U.S. presidential debate; oil drops
    Global stocks gain after U.S. presidential debate; oil drops Reuters - 1 hour 41 minutes ago

    By Richard Leong NEW YORK (Reuters) - Stock prices across major markets rose on Tuesday, led by U.S. technology and consumer sectors following the presidential debate between Hillary Clinton and Donald ... … More »

  • Canada to Make Petronas LNG Announcement Tuesday, Chiefs Say (1) Bloomberg - 1 hour 46 minutes ago

    Environment Minister Catherine McKenna, Natural Resources Minister Jim Carr and Fisheries Minister Dominic LeBlanc departed Ottawa for British Columbia after a cabinet meeting Tuesday morning, two indigenous leaders who oppose the development said. … More »

  • Stocks gain after U.S. presidential debate; oil drops
    Stocks gain after U.S. presidential debate; oil drops Reuters - 1 hour 49 minutes ago

    By Richard Leong NEW YORK (Reuters) - Stock prices across major markets rose on Tuesday, led by U.S. technology and consumer sectors following the presidential debate between Hillary Clinton and Donald ... … More »

  • US stocks lifted by consumer data, Clinton debate boost AFP - 1 hour 51 minutes ago

    US stocks jumped Tuesday following surprisingly good consumer confidence data and a strong performance by Democrat Hillary Clinton in the first US presidential debate. Consumer confidence spiked to 104.1 ... … More »

  • The top 10 books on Apple's iBooks-US Associated Press - 1 hour 59 minutes ago

    iBook charts for week ending September 25, 2016 (Rank, Book Title by Author Name, ISBN, Publisher ): iBooks US Bestseller List - Paid Books 1. The Girl on the Train by Paula Hawkins - 9780698185395 - (Penguin ... … More »

  • Landec tops Street 1Q forecasts Associated Press - 2 hours 8 minutes ago

    On a per-share basis, the Menlo Park, California-based company said it had profit of 12 cents. The results surpassed Wall Street expectations. The average estimate of seven analysts surveyed by Zacks Investment ... … More »

  • World Bank unanimously reappoints President Jim Yong Kim
    World Bank unanimously reappoints President Jim Yong Kim AFP News - 2 hours 11 minutes ago

    The board of the World Bank has unanimously agreed to name Jim Yong Kim to a second term as president, the global lender announced Tuesday. Kim had been the only candidate in a process criticized by World Bank staff and campaigners as lacking in … More »

  • Markets Right Now: US stocks end higher Associated Press - 2 hours 14 minutes ago

    The latest on developments in global financial markets (all times local): 4:00 p.m. U.S. stocks are closing higher, with many of the biggest gains coming in technology and consumer stocks. Solid quarterly ... … More »

  • Facebook to appeal German order on WhatsApp data
    Facebook to appeal German order on WhatsApp data Reuters - 2 hours 22 minutes ago

    Facebook (FB.O) said it would appeal against an order by a German privacy regulator on Tuesday to stop collecting and storing data of German users of its messaging app WhatsApp and to delete all data that has already been forwarded to it. The … More »

 
Recent Quotes
Symbol Price Change % Chg 
Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
You need to enable your browser cookies to view your most recent quotes.
 
Sign-in to view quotes in your portfolios.

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    0.141+0.003+2.17%
    N21.SI
    3.99+0.03+0.76%
    Z74.SI
    0.155+0.003+1.97%
    AFC.SI
    0.740.000.00%
    BS6.SI
    0.275+0.010+3.77%
    5ME.SI
  • % Gainers
    % Gainers
    NamePriceChange% Chg
    0.133+0.020+17.70%
    5PF.SI
    0.19+0.03+15.85%
    AWI.SI
    1.48+0.16+12.12%
    S91.SI
    0.198+0.020+11.24%
    M14.SI
    0.60+0.05+9.09%
    AZA.SI
  • % Losers
    % Losers
    NamePriceChange% Chg
    0.255-0.110-30.14%
    AZT.SI
    0.56-0.18-24.32%
    5VJ.SI
    0.395-0.070-15.05%
    K1Q.SI
    0.162-0.028-14.74%
    BGO.SI
    0.122-0.020-14.08%
    569.SI

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    1.3592-0.0003-0.02%
    USDSGD=X
    1.5241-0.0008-0.05%
    EURSGD=X
    1.7700-0.0002-0.01%
    GBPSGD=X
    73.8280-0.028-0.04%
    SGDJPY=X
    5.7033+0.001+0.02%
    SGDHKD=X
    3.03900.000.00%
    SGDMYR=X
    9,528.4180-0.03520.00%
    SGDIDR=X
    4.9046-0.0009-0.02%
    SGDCNY=X
    1.04220.000.00%
    AUDSGD=X
  • Commodities
    Commodities
    NamePriceChange% Chg
    1,330.400.000.00%
    GCZ16.CMX
    19.20+0.03+0.18%
    SIZ16.CMX
    92.98-1.47-1.55%
    ^XAU
    2.170.00+0.07%
    HGZ16.CMX
    43.85+0.41+0.94%
    CLV16.NYM
  • Bonds
    Bonds
    TreasuryYield (%)Yield Change
    1.11-0.02
    ^FVX
    1.56-0.03
    ^TNX
    2.28-0.05
    ^TYX