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Zacks Analyst Blog Highlights: Pulte Homes, D.R. Horton, Beazer, Fannie Mae and Freddie Mac
For Immediate Release
Chicago, IL – July 28, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Pulte Homes (PHM - Analyst Report), D.R. Horton (DHI - Analyst Report), Beazer (BZH - Snapshot Report), Fannie Mae (FNM - Snapshot Report) and Freddie Mac (FRE - Analyst Report).
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Here are highlights from Monday’s Analyst Blog:
More Good News in Housing
Keep in mind that the inventory data (and the sales numbers, for that matter) is a raw number and is not normalized by population growth. For well over a year now, my housing mantra has been, "more new starts bad, more new home sales good." Increasing housing starts had simply been adding to the inventory and making the problem worse.
At this point, though, that should be changing. Going forward, an increase in housing starts will be evidence of a real recovery in the economy. This news should get the homebuilders flying. For a quick trade, consider some of the financially stronger builders like Pulte Homes (PHM - Analyst Report) and D.R. Horton (DHI - Analyst Report). I would still shy away from some of the more leveraged names like Beazer (BZH - Snapshot Report).
I am not expecting a sharp increase. However, residential investment has been regularly subtracting 1.0 or more points from GDP growth in recent quarters on a direct basis. The absence of a negative is a positive, and the slower decline in residential investment will be a big part of the reason that second quarter GP will show a much smaller decline in activity than we saw in the fourth or first quarters.
It is possible that we will even see some positive GDP growth in the third quarter, although I am still leaning towards a small decline in the third quarter and a small positive number in the fourth quarter. However, for a change, residential investment will not be at the core of our problems. Commercial Real Estate will be the big problem going forward, not residential.
What was responsible for the jump in sales? Certainly the first time homebuyer tax credit (part of the stimulus package) played a role. Sales of new houses priced under $200,000 jumped to 48% of the total sales up from 37% a year ago. First-time homebuyers tend to buy low-priced starter homes, not higher priced McMansions. The mix shift (and possibly some price cutting) caused the median price of a new home to fall to $206,200 from $219,000 in May and $234,000 a year ago.
Even as activity starts to pick up, I would expect prices to remain under pressure for the rest of the year. Lower mortgage rates in May also likely played a role (there is a bit of a lag), so it will be interesting to see if the backing up in mortgage rates in June will put a damper on July sales. The action by the Fed in buying up lots of Fannie Mae (FNM - Snapshot Report) and Freddie Mac (FRE - Analyst Report)-backed paper is getting some traction in the real economy.
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