This Day On The Street
Continue to site
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

5 Homebuilder Stocks With the Brightest Outlook for 2012

BOSTON ( TheStreet) -- How could anyone bet on the housing industry when a national headline Tuesday exclaimed "Home Ownership Heads to New Lows" even as prices today are a third less than at their peak five years ago?

But residential-construction stocks are coming to life, gaining 6.5% in the past three months, with five of the biggest companies producing double-digit returns, according to Morningstar. The broader S&P 500 Index has risen 1.9% in the same period. For all of 2011, homebuilder stocks are down 26% versus the benchmark index's 3.4% decline. Still, something's at work here.

Back to the bad news: Standard & Poor's analysts said Tuesday that home prices across the nation are now right back to where they were in the second quarter of 2003, dispiriting news for potential investors.

Nevertheless, the "smart money" in the form of institutional investors, such as mutual funds, are buying homebuilder stocks heading into 2012. They're selecting the few that survived the worst housing-market decline since the Great Depression.

And the economy has been tossing the housing sector's prospects the occasional bone as well. For example, new-housing starts surged 15% in September to the highest level in 1 1/2 years, according to the Commerce Department.

A slowly recovering economy after a recession and a decade of overbuilding contributed to the worst housing-market conditions in a generation, and that, coupled with high unemployment, low consumer confidence, tough new lending standards and banks' reluctance to lend have hamstrung the industry over the past few years.

But record-low interest rates, and an outlook that things can't get worse than they are now, has boosted the fortunes of the homebuilding industry.

"Following historical precedent, the currently depressed housing market holds high potential for a dramatic rebound in the coming years, providing a major upside opportunity," Morningstar analysts write.

But they throw in the catch-all caveat: "While we expect a long, bumpy bottoming for this industry, an eventual major rebound in housing demand sometime in the next several years looks all but certain."

The question is how long can an investor hold out versus, say, a huge mutual fund that can afford to sit and wait?

Here are the five leading homebuilders and what analysts are saying about them:
1 of 6

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
Only $9.95
14-Days Free
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
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
DHI $30.06 0.00%
KBH $13.57 0.00%
LEN $45.31 0.00%
PHM $18.39 0.00%
TOL $27.30 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs