Homebuilders rally as housing market shows life

Number of homes under contract for sale is at highest level in a year and a half.

By Benzinga Dec 29, 2011 4:20PM

Image: Couple with For Sale sign in front of house (© Jupiterimages/Brand X/Getty Images)By Jay Wong and Abhi Rao, Benzinga staff writers


The National Association of Realtors reported Thursday that U.S. pending home sales rose 7.3% in November. This is the highest level of homes in contract in a year and a half. A Bloomberg survey forecast that November growth would only be 1.5%.


Consumers were buoyed by home prices and interest rates that have continued to remain low. The housing industry has shown signs of life as construction in new homes have increased and more have been purchased.


As the inventory of unsold new homes decreases, manufacturers of homes could see increased demand. The positive report affected several companies in Thursday's market, including PulteGroup (PHM) and KB Home (KBH).

 

Lowe's (LOW) was also up 2.35%. A healthier housing market should lead to more people investing in home improvements, whether the goal is to prep them for sale or to renovate a fixer-upper. 

 

Another company that should benefit if the housing market continues to perk up: Louisiana-Pacific (LPX). It manufactures and distributes home construction products and materials.


While the positive housing data was enough to drive the markets higher this morning, investors should exercise caution in applying this spike to the overall housing market. While the demand for housing has increased, the appreciation of home values and construction of new houses still faces significant hurdles. As the economy slowly improves, it remains to be seen whether the housing market will come along for the ride.

 

Neither Benzinga nor its staff offer investment advice, nor do they recommend that you buy, sell, or hold any security. 

More From Benzinga:
9Comments
Dec 29, 2011 5:39PM
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rodeo............don't hold your breath cause it ain't gonna happen for a long time. Get used to it.
The Realtors Group are the last ones to listen to.
Dec 29, 2011 5:36PM
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I wouldn't buy a house if my life depended on it. Its an anchor and it hurts families financially. I think the housing market "recovery" is a mirage and these stocks will plummet in coming months. This might be a good shorting opportunity.
Dec 29, 2011 5:43PM
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The most bullish scenario for the U.S. economy would be for the housing market to turn around, although I am not optimistic that this is on the horizon.
Dec 29, 2011 4:54PM
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Finally! The dismal housing market has me depressed. The government needs to do something for your average citizen, you can't just put the #1 investment into a standstill for a decade and expect the nation to recover. We need to see these numbers improving every month or we're never getting out of this mess.
Dec 30, 2011 1:24AM
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New housing starts wouldn't have anything to do with replacing all the houses destroyed in Joplin, Missouri and parts of the southeast ravaged by tornadoes earlier this year, would it? Lately I've been finding that just about every trumpeted story about good economic news can be picked apart, and never really seems to indicate that happy days are here again.
Dec 29, 2011 5:52PM
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Why don't I see anything about Home Depot on here? Did their stock increase, too? 
Dec 29, 2011 5:48PM
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I hate realtors, but at least this article tempts me to get involved with LPX, which is undervalued.
Dec 30, 2011 2:15AM
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consumer sentiment always trails reality.  It's human nature to believe that things are always going to be the way they are at this moment, which is part of the reason we got into this mess in the first place.  Economists (which are usually conservatively pessamistic) say that we won't start seeing a full rebound until 2012, but I wouldn't be surprised if we beat that estimate and pent up demand pushed that up to this summer.

 

My Six Percent  - Because You Don't Need a Real Estate Agent

Dec 29, 2011 5:37PM
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Good stuff. But was it Abhi Rao or Brandon Pilzner who was co-author?
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