Wall Street Betting on Home Builders

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With all signs pointing toward a recovery in the home building industry, investors are betting on homebuilders.

The Standard and Poor’s Super Composite Homebuilding Index has gained roughly 75 percent this year, while the S&P 500 Index has gained 15 percent over the same period.

This means that 2012’s record low mortgage rates, which have boosted demand for new homes, have also resulted in a bullish outlook from stock analysts on the industry in general.

Five Star Equities, which examines the outlook for companies in the residential construction industry, recently issued the following statement for investors: “Low borrowing costs and a decline in the supply of foreclosed homes have combined to provide a favorable environment for homebuilders in 2012. While new home sales fell slightly in August, 0.3 percent to an annual rate of 373,000, they still are roughly 30 percent higher than a year ago.”

At Wells Fargo Securities, their lead economist echoes the sentiment: “Builders are a little more optimistic about future sales and buyer traffic and the mortgage environment is favorable,” says Anika Khan. “New homes sales will continue to improve over the next few months and in the coming year.”

And while higher stock prices mean good news for the big builders, local and regional builders may be poised to grow even faster, since they can take advantage of opportunities much more quickly than big, national builders.

According to the Commerce Department, July saw the most building activity since April 2010 with a median price for a new home of $256,900, which is the highest since March 2007. This price showed a 17% YoY increase and saw the largest percentage increase since December 2004. Meanwhile homebuilder sentiment has also touched a six-year high, according to S&P/Case-Shiller.

As regional and local markets continue to improve, now is the time for local builders to plan for the increase in business. Bonded Builders can help. Homebuyers are looking to protect their investment, so offering an insured, third-party warranty will add value to the homes you build without adding massive costs. Additionally, a new home warranty from BBWG, reduces the risk builders can face, freeing up capital and letting them focus on building new business.

BBWG local sales and marketing directors can work with a builder’s staff to craft a risk-management plan. Your BBWG representative can also work with your sales staff so they know how to clearly present the advantages of the warranty to their home buyers.

To learn more, contact the local BBWG sales and marketing director in your area. Find them here.

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