Hopes are rising that the housing market has finally hit bottom. In addition to better-than-expected home sales reports, many homebuilder stocks are surging.
NEW YORK (CNNMoney.com) -- Has the housing market finally hit bottom? It's probably too soon to say -- but Wall Street sure seems to think so.
The Commerce Department reported Wednesday that new-home sales rose almost 5% last month after hitting their lowest point ever in January. Economists were expecting a decline of about 3%
This comes on the heels of two reports showing a better-than-expected gain in existing-home sales and the first increase in construction of new homes since June.
Investors have taken notice. The SPDR S&P Homebuilders (XHB) exchange-traded fund spiked about 8% higher Wednesday morning. The ETF includes several leading homebuilders, as well as companies with strong ties to the housing market like Home Depot (HD, Fortune 500) and Lowe's (LOW, Fortune 500) and paint maker Sherwin Williams (SHW, Fortune 500).
Talkback: Do you think housing has finally hit bottom?
Over the past two and a half weeks, a period when the entire market has surged, the homebuilders ETF has been one of the big leaders -- it is up more than 40% compared to about 20% for the S&P 500.
In fact, even though the broader stock market is still down sharply this year, several homebuilding stocks are actually in the black, including D.R. Horton (DHI, Fortune 500), Lennar (LEN, Fortune 500) and Pulte Homes (PHM, Fortune 500).
Now what does all this mean? Are savvy investors declaring that the worst is over for housing and that it's time to start plowing back into homebuilders? Perhaps. Still, it's hard to get overly excited about the recent housing data.
Investors have to be cautious.
Even though some of the February numbers suggest that the that the credit markets may be finally thawing after the Lehman Brothers collapse-induced freeze, many experts warn that isn't the same thing as a healthy housing market -- especially since home prices continue to fall.
In addition, the unemployment rate has risen sharply in the past few months and many economists expect that trend to continue.
So even though mortgage rates have been falling and banks may be more willing to lend now that the Treasury Department has a plan to help them unload some of their most troubled assets, that may not be enough to counter the growing ranks of unemployed who can't buy under any circumstances.
0:00 /0:53Mortgage affordability
Nonetheless, one fund manager who owns several homebuilder stocks said that even though it's premature to predict a housing recovery, the group has been beaten down so far that it won't take a significant real estate upturn for more share-price gains.
"One month does not a trend make. We're hopefully bouncing along the bottom but happy days are not here again," said John Buckingham, manager of the Al Frank fund. "Still, many of the stocks have been priced for the Great Depression 2. Lots of homebuilders have been generating cash during the downturn and their balance sheets, believe it or not, are in good shape."
Buckingham said he's a little concerned by the sharp recent run-up in the stocks. But he said he still likes shares of several of the larger builders, including MDC Holdings (MDC), Ryland (RYL), D.R. Horton and KB Home (KBH, Fortune 500), for the long-term.
At the end of the day, stabilization in the market is what is needed before a recovery. It's the classic case of learning to crawl before you can walk, let alone run.
Buckingham said that as long as the housing numbers are "getting less worse" that should be treated as encouraging news by investors. He added that even though some may dismiss February's surprising sales strength as a byproduct of more demand for foreclosed homes, any boost to sales is a good sign.
"Clearly there is interest in homes. Whether it's in foreclosure or not, there's still a buyer. That helps put in a floor on prices and could boost confidence," he said.
Another investor in several housing-related stocks agreed that the housing picture looks less bleak. But he added that investors will need to be patient. Just as the housing market didn't collapse overnight, a rebound won't take place quickly either.
"It's exciting that the numbers are perking up and the government's efforts to bring mortgage rates down are helping," said Doug Ober, chairman and CEO of Adams Express (ADX), a closed-end fund that invests mainly in U.S. stocks and owns Ryland, Lowe's and cabinet and plumbing fixtures maker Masco (MAS, Fortune 500). "But I think that probably the market is a little early on this. This is going to be a recovery that will take several years."
Shameless plug alert: Before I started writing The Buzz, I covered the media business for several years at CNNMoney.com. Some of this reporting is the basis of a book I've written about News Corp. CEO Rupert Murdoch called Inside Rupert's Brain, which was published on March 19 by Portfolio, an imprint of Penguin Group (USA).
Wednesday, March 25, 2009
Friday, March 20, 2009
Richard Russell: Bernanke Wants Mortgage Rates at 3-4%; "Massive Assault"
Friday, March 20, 2009
From Dow Theory Letters:
Russell Comment -- They're calling it "The Rambo Fed." Bernanke is not fooling around any longer. He's playing all his cards. He's going to put a floor under housing and boost asset prices in an all-out attack on the bear market. Bernanke wants to drive mortgage rates down and refinance housing at 3-4%. On the news, the dollar swooned, the Euro surged, the long T-bond exploded higher by six points, and the yield on the ten-year Treasury bond sank to 1.51%. Whew, what a day and what an announcement.
The Bernanke plan -- smother deflation with money and put a floor under housing. Bernanke will in no way accept deflation. The Fed will go all-out in printing Federal Reserve Notes in its massive assault on deflation. Bernanke will accept a collapsing dollar rather than a repeat of the Great Depression. Actually, the Fed would like a lower (not a crashing) dollar. A lower dollar would be inflationary, which is what the Fed wants.
From Dow Theory Letters:
Russell Comment -- They're calling it "The Rambo Fed." Bernanke is not fooling around any longer. He's playing all his cards. He's going to put a floor under housing and boost asset prices in an all-out attack on the bear market. Bernanke wants to drive mortgage rates down and refinance housing at 3-4%. On the news, the dollar swooned, the Euro surged, the long T-bond exploded higher by six points, and the yield on the ten-year Treasury bond sank to 1.51%. Whew, what a day and what an announcement.
The Bernanke plan -- smother deflation with money and put a floor under housing. Bernanke will in no way accept deflation. The Fed will go all-out in printing Federal Reserve Notes in its massive assault on deflation. Bernanke will accept a collapsing dollar rather than a repeat of the Great Depression. Actually, the Fed would like a lower (not a crashing) dollar. A lower dollar would be inflationary, which is what the Fed wants.
Monday, March 16, 2009
Good News On Credit Scores for People Involved in Foreclosure!
Good news!!! Looks like FICO has figured out that they may need to adjust their scoring guidelines. Could 650 be the new 850? Don't give up on those that have a foreclosure during 2008-2009, the government must figure out a way to get these hundreds of thousands of people back into the market, our economy depends on it.....
Source: The New York Times, Ron Lieber (03/14/2009)
How Will Foreclosure Effect Credit Scores?
The amount of damage to a credit score caused by foreclosure, deed in lieu or a short sale during 2008 and 2009 may be mitigated by the slower economic times, say some credit and legal experts.
FICO may have to adjust its credit scores to lessen the impact of a foreclosure in the last two years, says Todd J. Zywicki, a professor of law at George Mason University.
''It just seems obvious that a foreclosure in 2008 or 2009 doesn't have as much information value as a foreclosure five years ago,'' he says. ''To the extent that foreclosure doesn't predict future behavior as much as it did in the past, you'd expect that the FICO algorithm would change to adjust for that.''
One of the country’s largest credit unions Golden 1 has already figured out a way to lend to people with a foreclosure on their record by offering a mortgage repair loan specifically for those who have lost a home to foreclosure and who want to buy a new one.
BECU, another large credit union based in Washington State, is about to present a program to fellow lenders, ''How to Lend to the Newly Credit Impaired.”
Source: The New York Times, Ron Lieber (03/14/2009)
How Will Foreclosure Effect Credit Scores?
The amount of damage to a credit score caused by foreclosure, deed in lieu or a short sale during 2008 and 2009 may be mitigated by the slower economic times, say some credit and legal experts.
FICO may have to adjust its credit scores to lessen the impact of a foreclosure in the last two years, says Todd J. Zywicki, a professor of law at George Mason University.
''It just seems obvious that a foreclosure in 2008 or 2009 doesn't have as much information value as a foreclosure five years ago,'' he says. ''To the extent that foreclosure doesn't predict future behavior as much as it did in the past, you'd expect that the FICO algorithm would change to adjust for that.''
One of the country’s largest credit unions Golden 1 has already figured out a way to lend to people with a foreclosure on their record by offering a mortgage repair loan specifically for those who have lost a home to foreclosure and who want to buy a new one.
BECU, another large credit union based in Washington State, is about to present a program to fellow lenders, ''How to Lend to the Newly Credit Impaired.”
Wednesday, March 11, 2009
Foreclosure Tally: Good News, Bad News
Phoenix Business Journal
The number of foreclosure filings in February jumped 83 percent from last year’s total, but has abated from the peak six months ago, according to Default Research.
The Pennsylvania provider of foreclosure lists reported 5,624 filings of Notice of Trustee Sales in Maricopa County in February. That’s up sharply from February 2008’s 3,066, but well below the August 2008 tally of 8,685 filings.
Default Research founder Serdar Bankaci had some encouraging words: “After a steep increase in foreclosures in 2007 and 2008, market indicators in the Phoenix area show that median home values have remained relatively constant for the past 90 days. We expect to see much of the same for the next six months, but the market should begin to recover by the end of this year.”
On the flip side, the company reports that the number of nonresidential foreclosures is on the rise, representing 3.6 percent of all properties entering the process in February.
“It is no surprise that the commercial and retail businesses have suffered with the decline in consumer spending,” said Bankaci. “To further complicate the foreclosure situation, many commercial properties are now unable to refinance their loans due the credit crunch.”
The number of foreclosure filings in February jumped 83 percent from last year’s total, but has abated from the peak six months ago, according to Default Research.
The Pennsylvania provider of foreclosure lists reported 5,624 filings of Notice of Trustee Sales in Maricopa County in February. That’s up sharply from February 2008’s 3,066, but well below the August 2008 tally of 8,685 filings.
Default Research founder Serdar Bankaci had some encouraging words: “After a steep increase in foreclosures in 2007 and 2008, market indicators in the Phoenix area show that median home values have remained relatively constant for the past 90 days. We expect to see much of the same for the next six months, but the market should begin to recover by the end of this year.”
On the flip side, the company reports that the number of nonresidential foreclosures is on the rise, representing 3.6 percent of all properties entering the process in February.
“It is no surprise that the commercial and retail businesses have suffered with the decline in consumer spending,” said Bankaci. “To further complicate the foreclosure situation, many commercial properties are now unable to refinance their loans due the credit crunch.”
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