Investment Contrarians

Housing Stocks

Housing stocks are companies that are involved in the building of homes and condominiums for sale to the retail public. With real estate being such a large part of an economy, housing stocks are an important gauge of the strength of the economy. Some housing stocks can get into trouble if they become over-leveraged, taking on too much debt to try and increase their revenue and earnings. Housing stocks are very susceptible to shifts in interest rates and changes to the job market. When rates are lowered and more jobs are being created, this is a favorable environment for housing stocks. Conversely, when interest rates are rising and jobs are being lost, this can create a negative environment for housing stocks.


Headlines Say America’s Getting Richer—But We Know Otherwise

By for Investment Contrarians | Mar 28, 2013

America’s Getting RicherStocks are at their record highs, driven by a soaring stock market rally. The housing market is well off its lows, with sales and home prices edging higher.

The end result is that the overall wealth and optimism in America is higher.

According to the “CNBC All-America Economic Survey,” 33% of Americans felt the price of their homes will ratchet higher, up nine points since the previous survey in November 2012 and the high point since December 2007. The survey in March also suggested 48% of Americans believed it was a good time to invest, given the stock market rally; this number is up from 31% in November and it’s the highest since December 2009. (Source: Liesman, S.,“CNBC, American Dream Is Back; CNBC All-America Economic Survey,”CNBC, March 26, 2013.) So all is good, right?

As I previously commented, the stock market rally has made more people rich. A total of 300,000 newly minted millionaires werecreated from the current multiyear stock market rally, according to Spectrem Group. (Source: Frank, R., “CNBC, US (and Booming Market) Adds 300,000 New Millionaires,” CNBC, March 14, 2013.)

But hold on. The reality is that there continues to be a mass of Americans collecting food stamps, around 48 million, according to USDebtClock.org, and they don’t care about the stock market rally.

While the media’s headlines are commenting on how America is becoming richer, it’s a myth, of course—unless you don’t care about the other 95% of Americans who are just getting by and the bottom rung of this group who are considered America’s poor, making minimum wage.

In my view, the growing disparity between the rich … Read More


What 2013 Will Look Like for the Housing Market

By for Investment Contrarians | Nov 21, 2012

What 2013 Will Look Like for the Housing MarketOne of the most often talked about parts of the economy is the real estate market sector. Because real estate is such a large and important part of the economy, naturally, many eyes are focused on whether or not this market sector can and will rebound from its deep decline.

While we have certainly seen a strong bounce off the bottom, there are still many concerns for the future of both the real estate market sector and housing stocks, specifically. Investors in housing stocks are definitely ahead of the curve, as many housing stocks have increased substantially. With gains in excess of 100%, the question on many people’s minds is: will the real estate market sector continue its upward trajectory, or are housing stocks teetering on the edge of a massive decline?

The Department of Commerce just released the number of housing starts for October. As I expected, housing starts exceeded estimates, coming in at an annual rate of 894,000, up 3.6%. This is the fastest annual rate since July 2008. Many estimates taken by Bloomberg in a survey are still far too low, coming in at 780,000–873,000. (Source: “Housing Starts in U.S. Increase to Four-Year High,” Bloomberg, November 20, 2012.)

The reason why publicly traded housing stocks are doing so well and driving housing starts is that they are able to take advantage of extremely cheap financing. Essentially, private homebuilders are not able to borrow funds as cheaply as publicly traded housing stocks. Because investors are looking for places to park their money due to the low-interest-rate environment, this is giving housing stocks so much excess funding that they’re … Read More


Why Housing’s “For Sale” Sign Is Gone

By for Investment Contrarians | Nov 21, 2012

Why Housing’s “For Sale” Sign Is GoneThere were extremely difficult times for homeowners following the subprime mortgage implosion that helped to drag down the global economy in 2008. I recall at that time how easy it was to get a mortgage without even having to provide an income or work history to the lenders. When an entry level worker at McDonalds Corporation (NYSE/MCD) could get a mortgage with no questions asked, you had to wonder how long it would be before a housing bubble would surface.

Luckily, after several years of the housing market being dragged through the mud, the current situation has vastly improved to the point where housing stocks are hot.

The declining mortgage rates have helped. The $40.0 billion in mortgage-buying each month by the Federal Reserve has driven down the cost of interest rates to record lows.

There are more people working, and with the jobs picture improving, albeit at a slow pace, I expect the housing market will continue to strengthen.

Wherever you live, it’s clear that the housing market is displaying much-improved industry metrics. We just saw another strong reading for housing starts and building permits.

In October, there were an impressive 894,000 starts, according to the U.S. Census Bureau, which is above the Briefing.com estimate of 815,000 in October and the 863,000 starts in September.

Also lending support to the housing market recovery was a strong building permits reading of 866,000 in October, albeit short of the Briefing.com estimate of 900,000 and the 890,000 reading in September. The strong reading indicates that builders are expecting a good flow of buying in the housing market, and this could only bode … Read More