Hovnanian, Other Builders Gain As Sector Confidence Grows
April 15 2009 - 2:46PM
Dow Jones News
The home-building sector's confidence posted its biggest gain in
five years, an unexpected showing providing hope to a sector
fighting for survival.
Such optimism helped fuel Wednesday's sector gains. Standard
Pacific Corp. (SPF) soared 32.5% to $1.59 a share, while Hovnanian
Enterprises Inc. (HOV) saw a gain of 14.4% to $2.14 a share. The
Dow Jones U.S. Home Construction Index added 4.9%, with none of the
major public builders recently in negative territory.
According to the latest National Association of Home
Builders/Wells Fargo Housing Market Index, builder confidence for
new single-family homes climbed 5 points in April to 14 out of 100,
the largest one-month increase since May 2003. It was its first
time out of single-digit territory in six months.
That's compared with a high of 78 in December 1998. Still,
Washington-based NAHB cheered the gains, saying they suggest the
market is at or near bottom. Several reports have recently said
buyer traffic is up, fueled by falling prices, the lowest interest
rates in years and the government's first-time buyer tax
credit.
"This is a very encouraging sign that we are at or near the
bottom of the current housing depression," said NAHB Chief
Economist David Crowe in a statement.
The release follows a Wachovia note saying it expects the news
flow related to new home-sales activity to be positive over the
next four to six weeks.
Not everyone is convinced of a turnaround. Mounting foreclosure
sales persist as stubborn, bargain-priced competition. Meanwhile,
job losses continue, leaving many afraid to buy a home.
"Some investors think we could be getting closer to a bottom or
the light at the end of the tunnel. You need to see some sustaining
information to be able to make that call," Bob Curran, lead
home-building analyst with credit rating agency Fitch Ratings. "Is
it enough to suggest that a bottom has been reached? I'm not sure
there is enough of that evidence."
UBS, which pointed out the results were above its own and
consensus estimates of 10, agreed.
"While conditions are certainly showing signs of improvement,
much of this is attributable to normal seasonal trends," UBS
analyst David Goldberg wrote. "We continue to expect that a trough
in housing won't materialize until supply growth slows and demand
picks up further."
Still, the NAHB said every index component saw a boost. The
largest gain came from sales expectations in the next six months,
which surged 10 points to 25. Current sales conditions and
prospective buyer traffic each added 5 points, to 13 and 14,
respectively. The index rose in every geographic region in
April.
The closely watched survey, which has been conducted for more
than two decades, gauges builder perceptions of current
single-family home sales and sales expectations for the next six
months. Any number over 50 indicates more builders view conditions
as good, rather than poor.
-By Dawn Wotapka, Dow Jones Newswires; 201-938-5248;
dawn.wotapka@dowjones.com