Turnaround in Housing Market, Low Inventory Causing ‘Bubblelike Price Jumps’

Photo courtesy ownthedollar.com

Photo courtesy ownthedollar.com

Home construction was an important topic this week, with the release of data showing construction on new U.S. homes in February showed “gains for single family residences and apartments as longer-term trends signaled a housing market that continued to strengthen,” according to the Wall Street Jounal’s Market Watch.

In fact, the turnaround in the housing market, after so many months of lagging demand, has caught home builders off guard, according to the New York Times (http://www.nytimes.com/2013/03/21/business/economy/in-us-surprise-housing-demand-catches-industry-off-guard.html?ref=business&_r=0). “After six years of waiting on the sidelines, newly eager home buyers across the country are discovering that there are not enough houses for sale to accommodate the recent flush of demand,” noted the Times report.

That’s leading a rush for the new but still limited inventory and “bubblelike price jumps” in areas that have been hit hard in recent years. Standard & Poor’s Case-Shiller index shows that prices nationwide rose 7.3 percent throughout 2012 but in places like Sacramento, CA and Phoenix, the prices have risen 35 percent and 26 percent, respectively. Part of what’s driving the market is the improved economy, but the low interest rates are also playing an important role, noted experts in the Times story.

Certainly this is great news for investors in small cap housing stocks, who have already enjoyed a great return if they invested last Fall. Their only issue now is whether to sell and take some profits or continue to enjoy the rise.

Here are six small cap home builders we last covered Sept. 14:

Red Bank, NJ-based Hovnanian Enterprises (NYSE: HOV, http://www.khov.com/) specializes in single-family detached homes, condominiums and town homes and operates in two segments: homebuilding and financial services.  In October 2011 HOV was trading for $0.89. By Sept. 14, 2012 it had jumped to $3.89, with a market cap of $515 million. HOV closed March 20 at $6.32, up 13 cents for the day. HOV’s market cap is now $879 million and 52-week trading range is $1.52-$7.43.

Los Angeles-based KB Home (NYSE: KBH, http://www.kbhome.com/) is a home building and financial services company catering in large part to first time buyers. KB is an old Southern California home builder, founded in 1957 and formerly called Kaufman and Broad. Back on Aug. 31 KBH closed at $11.04 with a market cap of $851 million. It closed Sept. 14 at $13.65, pushing its market cap up to $1.05 billion. KBH closed March 20 at $21.57, up 54 cents with a market cap of $1.67 billion. Its 52-week trading range is $6.46-$21.79.

Columbus, OH-based M/I Homes Inc. (NYSE: MHO, http://www.mihomes.com/) builds single family homes primarily in the Midwest, Mid-Atlantic and southern parts of the U.S. The  company was founded in 1973 and, like most of the other builders, has homebuilding and financial services divisions. It closed Sept. 14 at $20.77, with a market cap of $379 million. MHO closed March 20 at $26.03, up 86 cents on the day, and now has a market cap of $584 million. Its 52-week trading range is $11.25-$29.07.

Atlanta-based Beazer Homes USA (NYSE: BZH, http://www.beazer.com/) builds and sells single-family and multiple-family homes in 16 states in the U.S. It also acquires, improves and rents homes. The company operates through commissioned home sales counselors and independent brokers. At the close on Sept. 14 BZH was trading for $3.77. It closed March 20 at $16.86, up 19 cents for the day, with a market cap of $410 million. Its 52-week trading range is $10-90-$20.15.

Irvine, CA-based Standard Pacific (NYSE: SPF, http://www.standardpacifichomes.com/) builds single family and detached homes and targets a wide range of homebuyers. It also provides mortage financing services through its mortage finance subsidiary, Standard Pacific Mortgage. SPF closed Sept. 14 at $7.46, up 19 cents for the day and setting a new 52-week high, with a market cap of $1.49 billion. It closed March 20 at $9.07, up 35 cents for the day, with a market cap of $1.9 billion. Its 52-week range is $4.12-$9.18.

Westlake Village, CA-based The Ryland Group (NYSE: RYL, http://www.ryland.com/) is a homebuilder and mortage finance company. RYL covers many aspects of the home buying process including design, construction, title insurance and escrow. It closed Sept. 14 at $31.52, also setting a new 52-week high, with a market cap of $1.41 billion. RYL closed March 20 at $42.16, up $1.61 for the day, with a market cap of $1.9 billion. Its 52-week trading range is $17.18-$43.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s