Sales, stock prices, order backlogs, and forecasts are all up for stick-built housing. By BUILDER Magazine Staff
With national housing data through November of last year confirming the market's resiliency, John Stanley, home building analyst for UBS Warburg, believes that single-family starts, permits, and sales are "on pace for full-year gains to record or near-record levels."
Sales are up, material costs are down, labor is plentiful, and even the industry's oft-shunned stocks bested the market average for the second straight year in 2001.
"As the year begins, things are going very well for the industry as a whole," says Isaac Heimbinder, a Houston-based building industry consultant. "But with sales beginning to falter in some regions, we could be going back to the more traditional cyclical home building industry environment."
While many economists have predicted that housing will falter early this year, recovering by the fourth quarter, Stanley is much more confident that the industry will continue to overcome and out-perform their predictions.
"We believe the stage is set for another impressive showing in 2002," he says. "The large public builders took everything the economy threw at them last year and emerged with one of the best earnings performances in the stock market, coming as it did on top of one of the best growth records of the 1990s. This stark contrast with the earnings plunges of prior recessions is the clearest evidence yet that things are different for the industry, which we expect will lead to more appropriate valuations."
Near-record levels of new-home affordability is helping ensure sales remain high even in the face of gradually increasing mortgage rates, says Joe Sroka, home building analyst at Merrill Lynch. "While rates may rise as the economy recovers this year, we believe this near-term detractor to affordability should be at least partially offset by an improved employment environment and better consumer confidence. In short, we believe consumers are willing to use higher-priced money if they have better confidence in their employment outlook."
With national housing data through November of last year confirming the market's resiliency, Stanley believes that single-family starts, permits, and sales are on pace for full-year gains to record or near-record levels.