Foreclosures Rising: Are We Nearing the End of the Housing Crisis?

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(Written by Rebecca Lipman. List compiled by Eben Esterhuizen, CFA)

The housing crisis has been going on long enough, and industry analysts are eager for the flow of  foreclosures to subside long enough to re-establish new normal levels for the industry. In short, the sooner the inevitable foreclosures get cleared out, the better.

Foreclosure activity is picking up. More US homes entered the foreclosure process in October than in previous months, reports the Associated Press. There was also a monthly increase in the number of homes scheduled to be auctioned, repossessed, and given notice of default.

In all, the numbers of homes likely to be lost to foreclosure have reached a seven-month high. This is partially due to banks actively pursuing “a swelling backlog of homes with mortgages that have gone unpaid” after a series of delays caused by shoddy filings.

Despite the depressing sentiment that goes along with foreclosures, industry professionals are glad to see a race to the finish. “Industry experts say a housing market turnaround isn’t likely to occur as long as there remains a glut of potential foreclosures hovering over the market, so October’s increase in foreclosure activity means a potentially faster revival for housing,” explains the Associated Press.

Government intervention has drastically slowed the foreclosure processes by, for example, requiring tedious filing practices on the part of lenders. “It’s like a rain delay,” RealtyTrac CEO James Saccacio said. “We’ll eventually see foreclosure processing go up.”

 

Investing Ideas

So, with foreclosures on the rise, how long before the excess housing inventory is removed from the market? And more importantly, how long before the housing market stabilizes?

For ideas, we had a look at insider trading data, and identified a few bullish housing insiders. These executives have used their own money to buy the shares of their employers…are they telling us to expect a rebound?

Use this list as a starting point for your own analysis.

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1. Avatar Holdings Inc. (AVTR): Operates in the real estate business in Florida and Arizona. Over the last six months, insiders were net buyers of 10,749 shares, which represents about 0.16% of the company's 6.91M share float.

2. Griffon Corporation (GFF): Operates as a manufacturing company, with an exposure to the housing market. Over the last six months, insiders were net buyers of 14,000 shares, which represents about 0.02% of the company's 57.64M share float.

3. Headwaters Inc. (HW): Provides products, technologies, and services in the building products, construction material, and energy industries primarily in the United States and Canada. Over the last six months, insiders were net buyers of 25,000 shares, which represents about 0.04% of the company's 58.81M share float.

4. Texas Industries Inc. (TXI): Engages in the production and supply of heavy construction materials in the United States. Over the last six months, insiders were net buyers of 344,598 shares, which represents about 1.58% of the company's 21.76M share float.

5. PennyMac Mortgage Investment Trust (PMT): Over the last six months, insiders were net buyers of 77,250 shares, which represents about 0.34% of the company's 22.94M share float.

6. Campus Crest Communities, Inc. (CCG): Focuses on building, owning, and managing student housing properties in the United States. Over the last six months, insiders were net buyers of 10,900 shares, which represents about 0.04% of the company's 30.60M share float. 



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Real Estate , Stocks

Referenced Stocks: AVTR , GFF , HW , PMT , CCG , TXI

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