This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Homebuilders Upgraded On Weakness

NEW YORK ( TheStreet) -- Most equity market strategists say the housing market should be the driver for an improving U.S. economy for the remainder of 2013 and beyond. Their theme is that rising home prices are a good thing, and that supply is low for both existing and new homes. In addition, mortgage rates remain low making homes affordable.

My theme is less optimistic with the housing market performing at half the pace of what the National Association of Home Builders (NAHB) defines as normal. The NAHB Housing Market Index at 44 remains below the neutral 50 reading.

The NAHB considers single-family housing starts the most important measure and the April data showed that this key statistic fell by 2.1% to an annual rate of 610,000, just above the key 600,000 level.

The NAHB has numerous concerns about the sustainability of the market for new home construction and sales including; the cost of building new homes is on the rise due to tightened supplies of materials, lots and labor. In addition, community banks remain reluctant to increase exposures to construction and development loans given a still elevated $201.6 billion exposure established during the housing bubble years.

The NAHB agrees with my assessment concluding that the market for new single family homes is "about half-way back to what could be considered a full recovery."

The supply of existing homes slowed as major banks delayed the foreclosure process as home prices rise. Banks have also slowed down sales of homes in the category "Other Real Estate Owned". At the end of the first quarter banks had an inventory of $35.9 billion in OREO properties, up 195.5% from the end of 2007. At some point this hidden supply will return to the market.

In addition, as home prices rise fewer homes are underwater territory vs. mortgage debt, which will increase the supply of existing homes on the market. More "For Sale" signs are up in my community in Tampa Bay.

1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
BZH $17.48 0.00%
DHI $27.43 0.00%
HOV $3.56 0.00%
KBH $15.28 0.00%
LEN $50.43 0.00%


DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs