Posts Tagged ‘real estate market’
The New Housing Boom
By Mitchell Clark, B.Comm. for Profit Confidential
My cousin and his family had to walk away from their house in Arizona. There were no buyers, and they were underwater after the market crashed. The whole thing was really hard on them on all fronts, and they had to move. They’re in Colorado now, closer to family, with the ordeal behind them.
Like most things, timing is everything. In real estate, institutional investors are buying homes like crazy to rent out. The new housing boom is for rentals.
The Wall Street Journal wrote that The Blackstone Group L.P. (NYSE/BX) is buying homes at a rate of about $100 million a week, with institutional investors now making up a third of all cash buyers. Affordability for individuals is going to get squeezed.
On the stock market, homebuilder stocks continue to roar. Lennar Corporation (NYSE/LEN) reported excellent strength in its financial results.
According to the company, its fiscal first quarter of 2013 (ended February 28, 2013), produced revenue growth of 37% to $990 million. New orders grew 34% to 4,055 homes; the company’s order backlog grew 82% to 4,922 homes. Earnings for Lennar grew significantly to $57.5 million, or $0.26 per diluted share, compared to net earnings of $15.0 million, or $0.08 per diluted share.
On the stock market, institutional investors have bid the stock up 30 points since last October. (See “Stock Market Sinkhole: ‘It Didn’t Look Unstable’.”) It’s a stock market breakout for sure, but it’s based on fundamentals. Lennar’s stock chart is below:
Chart courtesy of www.StockCharts.com
Homebuilder PulteGroup, Inc. (NYSE/PHM) quintupled on the stock market over the last six months. Hovnanian Enterprises, Inc. (NYSE/HOV) … Read More
Will Housing Stocks Crash?
By Sasha Cekerevac, BA for Profit Confidential
One of the most often talked about parts of the economy is the real estate market sector. Because real estate is such a large and important part of the economy, naturally, many eyes are focused on whether or not this market sector can and will rebound from its deep decline.
While we have certainly seen a strong bounce off the bottom, there are still many concerns for the future of both the real estate market sector and housing stocks, specifically. Investors in housing stocks are definitely ahead of the curve, as many housing stocks have increased substantially. With gains in excess of 100%, the question on many people’s minds is: will the real estate market sector continue its upward trajectory or are housing stocks teetering on the edge of a massive decline?
I think recent comments by the CEO of D.R. Horton, Inc. (NYSE/DHI), Donald Tomnitz, can illuminate a lot. Tomnitz stated in a conference call that he was quite concerned that the lack of jobs might lead to lower home sales next year. D.R. Horton is, by volume, the largest homebuilder in America. One of the most sobering moments was when Tomnitz stated, “I also see the fact that there are potential layoffs in a number of industries, especially the defense industry.” (Source: “D.R. Horton Falls as CEO Cautions on Job Growth Next Year,” Bloomberg, November 12, 2012.)
The question isn’t the current level of the real estate market sector. For the fourth quarter, which ended September 30, 2012, D.R. Horton reported net income of $100 million, a massive increase of 180% from the prior year’s quarter. Revenue … Read More
The Stock Market & Oil Prices: A Dangerous Duo
By Mitchell Clark, B.Comm. for Profit Confidential
It really is the perfect environment for higher oil prices, which is both good and bad for the U.S. economy. Higher oil prices reflect a better economic outlook, as speculators bet on better gross domestic product (GDP) growth in the U.S. market. This translates right into the stock market. But, as we all know, higher oil prices also mean higher gasoline prices…and this is inflationary and cuts into consumers’ incomes.
There is a slight premium in oil prices today related to tensions with Iran. It’s not a big premium, but my best guess is that it might be around $5.00 a barrel. The stock market certainly isn’t worried about higher oil prices right now; equities have too much support from the Federal Reserve to be concerned. Stock market investors are buying because of unprecedented monetary stability and the hope for better corporate visibility. Oil prices are going up because of demand and supply, coupled with some speculative fervor.
The big news in the stock market continues to be with large-caps, especially within the technology sector. As a group, I think technology is a little ahead of itself. Things just aren’t that rosy yet. But, with stock market valuations still very fair, positive investor sentiment is behind the big push. Institutional investors (like individuals) don’t have much choice out there in the investment landscape. Bonds and cash don’t pay anything and the real estate market is a bigger gamble than dividend payments.
Chatter in the investment world is toying with the possibility of oil prices heading to around $125.00 a barrel in the not-too-distant future. (See Why Oil Prices, Gold … Read More
Our Annual Forecast: How Much
Home Prices Will Fall This Year
By Michael Lombardi, MBA for Profit Confidential
For the past four years I’ve been singing the same tune…
The U.S. economy cannot recover unless the U.S. housing market recovers. As a past “real estate man,” (in my life), I’ve never seen an economic recovery unaccompanied by a real estate market recovery.
There was a lot of speculation going into 2011 that it would be a year for the U.S. housing market to find a bottom. Well, the U.S. housing market hit a “bottom” last year, but not one to build upon.
U.S. new home sales fell 2.2% in December, which closed out 2011 with 302,000 new homes during the year, down from 323,000 new home sales in 2010 (Source: U.S. Commerce Department). In terms of number of units sold, this makes 2011 the worst year on record for new home sales—since 1963. So much for a U.S. housing market recovery.
Even though mortgages are at historically low interest rates, the low rates are not translating into new home sales. Sure, fear of further price declines in the U.S. housing market is discouraging people from buying new homes and directing consumers to rent instead, which I’ve been talking about.
And although fear of further home price declines may play a role, I’m more inclined to believe that the stagnant jobs market and weak economy are resulting in the greatest fear: uncertainty. This is what is really driving more people to rent homes instead of buying homes.
There are those still forecasting a rebound in 2012 for the U.S. housing market, but as I’ve been talking about in PROFIT CONFIDENTIAL, government estimates for foreclosures are still high at … Read More
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