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The housing market, with its sensitivity to changing business cycles, is a functional indicator of overall economic conditions at times when housing is particularly important to the economy. According to the National Association of Realtors, existing home sales are projected to trend up in 2008, with pending home sales showing a slight near-term rise. However, projection is that new home sales recovery may not occur before 2009. Lennar Corporation (LEN) a leading home builder in the U.S., constructs and sells single-family attached and detached homes, multi-level buildings to first-time, move-up, and active adult home buyers, and also engages in the purchase, development, and sale of residential land directly and through unconsolidated entities.
Gaining positive momentum from the recent Federal Reserve's rate cut of 75 basis points, the housing stocks surged last week even with the negative housing market data last month. According to a study by the National Association of Realtors, existing-home sales are likely to rise to 5.70 million in 2008, while existing-home prices will rise 0.3 percent to $218,300 in 2008 from a forecast of $217,600 for all of 2007. However, the Realtors group recently reported existing-home sales fell 2.2 percent in December, and lost 13 percent for the year. The median home sale price posted its first annual decline since the trade group began keeping records in 1968. But, according to Eric Marshall, director of research at Hodges Capital Management, the key is that the rate of decline is starting to slow. He said, "People are starting to get their arms around how bad this will ultimately be. These stocks are trading below book value, and that is usually a time to buy."
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