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Lennar – The Housing Market Has Stabalized

Home builder Lennar recorded earnings recently stating a 44% jump in new orders and net earnings. Lennar for those who do not know are one of the many publicly traded home building stocks. As you can imagine in the housing boom these stocks soared and within the last four years they have done nothing but go down. Although recently things have changed for the home builders with a significant increase in orders, a housing bottom? Lennar’s CEO Robert Stuart certainly thinks so and was quoted saying “the housing market has stabilized and the recovery is well underway.”

Lennar during the last year is up 175% and larger publicly traded home builders like Pulte Homes is up over 300%. So is it time to jump on the band wagon and get on this train? Heck no, at least in my opinion:) I have some support according to CNBC’s Diana Olick’s most recent article Buck Horne, an analyst at Raymond James was quoted saying “We are in uncharted territory on the valuations. We’re still finding a lot of difficulty in mortgage availability for first-time home buyers, and we are not seeing, despite these calculations of rent-to-own affordability, we’re not seeing an exodus of renters out of apartment REITs yet.” If that isn’t the understatement of the century I’m not sure what is! If you were to read my last blog cities like Boston Massachusetts have seen incredible rental increases throughout most Boston Apartments and demand is high. As Buck Horne stated trying to get a mortgage now a day’s is very difficult for first time home buyer’s which is one of the contributing factors to the extreme rental prices you are seeing in Boston Apartments.

Although recently two of the largest residential apartment REITs Avalon Bay communities and Equity Residential stock prices have been sliding since they put in all time highs back in July of this year. Is this the first chink in the armor? Are we going to start to see Boston Apartments actually become less desirable and double digit rent increases instead of triple:) In my opinion these stocks are just ahead of the stock market indices which are soon to follow and sell off. The real question is what happens after that. If these stocks rebound after the elections and go on to set new all time high’s or at least test their highs we might be bottoming out but to state a full fledge recovery is underway would be a stretch. For now wait for a serious pullback in the home building stocks before buying and don’t rent Boston Apartments if you don’t have to.

 

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