The outlook for homebuilders is favorable with declining unemployment, low interest rates, rising home prices and pent-up demand, says Thomas Hughes, a commentator for OptionInvestor.com, in a Seeking Alpha blog
“The home builders have mostly reported for the first quarter of 2016 and by all accounts the reports are good,” he writes. “Sure, on a case by case basis some estimates were missed but the market is missing the forest for the trees.”
New single-family homes fell 1.5 percent in March from a year earlier to a seasonally adjusted annual rate of 511,000, but prices are steady. “A shortage of properties for sale, which is limiting choice for buyers and driving up prices, remains a constraint for the housing market,” Reuters reported.
Hughes says homebilder Hovnanian stands out as a “clear winner” in its first-quarter earnings report, while Toll Brothers and DR Horton also are doing well.
“Data from FactSet shows that earnings and revenue outlook for the group is very good,” Hughes writes. “The consumer discretionary sector is expected to post revenue growth of 5.5 percent this quarter, better than the -1.1 percent estimated for the S&P 500, led by a 20 percent to 30 percent increase in homebuilder revenue.”
Even though the inventory of homes is tight at 5.8 months, that is the most since September and up from 5.6 months in February.
“Last month, the inventory of new homes on the market rose 2.1 percent to 246,000 units, the highest since September 2009,” Reuters reported. “Despite the increase, new housing stock remains less than half of what it was at the height of housing bubble.”
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