Homebuilders rally as housing market shows life
Number of homes under contract for sale is at highest level in a year and a half.
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.
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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.
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