The past few years haven't been what you might call a happy time for shares of home building stocks. Consider that the Homebuilders Exchange-Traded Fund (NYSE: XHB) plunged from $40 per share in early 2007 to just $8 per share earlier this year.
Since March, however, things have improved. There are signs that the housing market is getting back on its feet -- or at least, declining less slowly. Existing home sales recently registered their biggest gain in more than a decade. Seasonally-adjusted single-family building permits are up 27% since bottoming in March, while single-family housing starts have increased five straight months and are up 36% since March.
I've also seen many hopeful signs with interest rates.
Freddie Mac said that the 30-year fixed mortgage rate fell to 5.12% last week, and the 15-year rate is now down to just 4.56%. With lower prices and very low mortgage rates, housing affordability hasn't looked so good in many years. Measuring from the March low, shares of XHB have nearly doubled in less than six months.
So is it safe to go back into home builders?
The short answer is yes, but cautiously. I do see some compelling values among home building stocks, although I should add that no major home builder receives my highest grade of A, or strong buy.
Let's run through some of the home builders I like. Using my Portfolio Grader stock-rating tool, the following four home building stocks all receive a B grade, which signifies a buy.
Click on each stock to learn more.
Stock #2: D.R. Horton (NYSE: DHI)
Reader Comments (Page 1 of 1)
8-29-2009 @ 7:46AM
mmiller said...
NVR stock price is unusually expensive compared to all other home builder stocks. The activity seems to be dominated by insider trading. Is this safe, or should this be something to be cautious of?
8-29-2009 @ 8:11AM
Paul said...
My answer is- Not with My Money or Your Money. Many People People in Many States are Finally now considering Developers to be the Bullies on the block with theyre relentless push to Overide Growth Managment Laws bringing Pollution , Congested Traffic, Lower Water supplies, Higher Taxes, Shooting of Eagles in their nests and running over All types of Wildlife with Bulldozers, starting Wildfires that get out of control and generaly a Ruined Atmosphere for smaller communities. People are now signing Petitions of Moritoium to get rid of these Developers and Builders that have long taken advantge of " under the table Bribes to local Governments. I signed a petition myself and encourage others to do the same and to attend Local Planning meetings and Make Your Voice Loud and Clear. Governments Will listen if People Pack the Hall in Numbers.
8-29-2009 @ 8:23AM
pboud5515 said...
Please don't full yourself The Housing market is going to get a hit in the next three months when all the banks release more homes that people that have been living in there homes rent free. When they release this figure it's going to floor the investment community. When those toxic loans are taken care of then we'll see the Housing market come back. Just a word of caution.
8-29-2009 @ 8:31AM
Paul said...
Reviving the Housing Construction industry at a time when Foreclosures are everywhere and Many More to come makes absolutely no sense at all. Just look around and see the " For Sale" Signs. The Real news they are Not telling you is- the same amount of Foreclosures that occured last year up to now will occure next year also. Also, If you are wondering why your house is Losing Value you can Blame Freddie Mac, Fannie Mae and State and Local Government for Allowing the Builders to Overbuild and Flood the Market with Unwanted Particle Board Houses. In states like Florida and California this Overbuilding Screwed the Entire State. New Towns and even new Counties and Cities sprung up from Hell during the last 30 years and many of them have economicly collapsed and have been abandoned leaving behind Useless Particle Board buildings and a Ruined National Economy. Pollution is Everywhere and Raw Materials Are Near Depletion. It is time to End the practice of relying on the Housing and Construction Industry as a means of Speculation, employment or Economic gauge. The Truth is this Industry is the Biggest Waster of our Natural and Economic Resources which are Now Near Depletion
8-29-2009 @ 11:22AM
ajgorm said...
Damn right PAUL could not of said it better. The cost to maintain these homes is a farce to the tax payer. Can we build more homes than we have people to live in them is what I would like to find out. Talk about digging a hole to no where our planning departments in local areas need to GOOOooo. Vote the bastards out and put people in there that will work for the community not for the fed a holes in Washington that know only GREED,,
8-30-2009 @ 7:22AM
duckhookmaster said...
The time to buy home builder stocks was 4 months ago. If you did, now is the time to be taking some money off the table. If you didn't, you've missed the boat.
8-30-2009 @ 8:07AM
Doug Keel said...
If anything, buy FRE and FNM. I bought at 50-60 cents a share during the worst of the housing crunch but have rebounded nicely into the $2/share range in the last month. And there will be much more yet to come as Housing continues it's climb out of the ditch.
8-30-2009 @ 12:32PM
Bothepro24 said...
I would not be swayed by the increase in sales. Forced sales and foreclosures will create positive activity. As for the new start figure, this would be a concern based on the glut of homes available and the high number of homes on the bubble as forced sales. While the number of available homes increase, it will certainly help the buyer as the supply will overshadow the demand driving prices lower. I wouldn't be so positive regarding any home builders. There major problem is they are sitting on land they paid to much money for and are forced to do something. Not a good reason to build.