CHICAGO, April 24, 2014 /PRNewswire/ --Today, Zacks Equity Research discusses the Homebuilding, including PulteGroup, Inc. (NYSE:PHM-Free Report), Toll Brothers, Inc. (NYSE:TOL-Free Report), Ryland Group, Inc. (NYSE:RYL-Free Report) and Lennar Corp. (NYSE:LEN-Free Report).
Industry: Homebuilding
Link: http://www.zacks.com/commentary/32269/
Homebuilding Stocks: Has Spring Sprung?
The housing slowdown that began in the second half of 2013 was aggravated by a harsh winter. This took a toll on the homebuilders in the December quarter, delaying construction and raising serious doubts as to the strength of the housing market.
The weather has no doubt been a major spoilsport for the sector in the past quarter. However, there are other pressing issues for the builders as well. Shortage of lots and skilled labor, rising cost of materials and a declining level of new homes in inventory are not making things easier for these builders. Moreover, the recent spike in mortgage rates and rising home prices are hurting demand. As a result, many companies saw declining order trends in the last reported quarter.
Orders declined around 18% at PulteGroup, Inc. (NYSE:PHM-Free Report), 6% at Toll Brothers, Inc. (NYSE:TOL-Free Report) and 4% at Ryland Group, Inc. (NYSE:RYL-Free Report) in the last reported quarter. Though order trends improved year over year for others like Lennar Corp. (NYSE:LEN-Free Report), it slowed down from the past quarter.
A slew of data released recently clearly shows that the housing sector has had it tough in the recent past.
Homebuilder confidence, as indicated by the National Association of Home Builders (NAHB)/Wells Fargo housing market index, dropped to 47 in both April and March and 46 in February from 56 in January indicating increasing builder concerns about meeting ongoing and future demand thanks to a shortage of lots and labor.
Further, housing starts declined 0.2% to an annualized rate of 907,000 in February from the prior month, weighed down by lower multi-family starts. Meanwhile, single-family homes and apartments rose only slightly. The February data was a continuation of the January trend when starts dropped 16%. New home sales also dipped 3.3% in February as the weather remained bitter and supply constraints continued to plague homebuilders.
However, as the winter chill subsides and builders prepare for the upcoming spring selling season, improving trends may well be in the cards. Builders are increasing their inventories of homes as they anticipate a relatively strong spring buying season. This might propel homebuilder stocks higher in the months ahead as demand for new homes rise.
Although interest rates are rising, they are currently doing so below historical levels; housing is still affordable. In addition, accelerating job growth, an improving economy and unlocking pent-up demand will likely boost demand for new homes for the rest of the year.
Building permits, a measure of future construction, rose 7.7% in February, the highest rate since October last year and, more importantly, the second highest rate since the middle of 2009. The strong permits show that we can expect steady gains in construction activities over the spring and summer months. NAHB also expects 2014 to be a strong year for housing, expecting a big increase in single-family construction.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Click here for your free subscription to Profit from the Pros.
Get the full Report on PHM- FREE
Get the full Report on TOL- FREE
Get the full Report on RYL- FREE
Get the full Report on LEN- FREE
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
http://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumedthat any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein andis subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Logo - http://photos.prnewswire.com/prnh/20101027/ZIRLOGO
SOURCE Zacks Investment Research, Inc.
