After upbeat homebuilder confidence data, the U.S. housing
construction and building permits figures rebounded strongly in
July, suggesting that the housing market recovery might finally be
back on track.
Data released by the U.S. Department of Housing and Urban
Development and the U.S. Census Bureau on Tuesday showed that
housing starts surged to an eight-month high in July, growing 15.7%
from the prior month to an annualized rate of 1.093 million units.
Single-family housing starts were up 8.3%, while multifamily
production jumped 28.9%. The July increase was a relief from the
decline in the past two months and also beat market
Building permits, a gauge of future construction, also bucked
the previous trend. After declining in June, building permits grew
8.1% in July.
Homebuilder confidence data for August released earlier this
week hit its highest level since January. Homebuilders' confidence,
as indicated by the National Association of Home Builders
(NAHB)/Wells Fargo housing market index, rose 2 points to 55 in
August - the third consecutive monthly gain for the index.
Homebuilder stocks rallied on the latest upbeat housing data. KB
), DR Horton, Inc. (
), Lennar Corp. (
) and Ryland Group, Inc. (
) were all up more than 2%. Toll Brothers, Inc. (
) and PulteGroup Inc. (
) rose more than 1%.
The housing slowdown that began in the second half of 2013
worsened as the harsh winter in the December quarter delayed
construction, raising serious doubts regarding the strength of the
Moreover, shortage of lots and skilled labor, rising cost of
materials and declining inventory of new homes were not making
things easier for the builders. Also, the spike in mortgage rates
and rising home prices were hurting demand, which further added to
the woes. As a result, many companies witnessed declining order
trends in the December quarter.
As the winter chill subsided, several homebuilders recorded
improving order trends in the March quarter. However, the spring
selling season turned out to be softer than expected slowing order
growth on a sequential basis for large homebuilders like Lennar and
Pulte in the Jun 2014 quarter.
Also, some negative housing reports around that time indicated
skepticism among home buyers regarding home purchases. Pending home
sales, new home sales (single-family houses), housing starts as
well as building permits declined in June from the prior month.
However, the latest robust housing data raises hope that the
housing sector might well be gathering steam and buyers are back in
the market with improvement in the job scenario. It, however,
remains to be seen whether these construction gains can be
sustained through the rest of the year.
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PULTE GROUP ONC (PHM): Free Stock Analysis
LENNAR CORP -A (LEN): Free Stock Analysis
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RYLAND GRP INC (RYL): Free Stock Analysis
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