Stand-up comedians know how hard it is to work a tough crowd. Today Federal Reserve Chairman Ben Bernanke, didn't exactly work the crowd with his fresh material at the National Association of Home Builders convention in Orlando.
In a carefully worded address to perhaps the most beleaguered trade group in the nation, the Fed chief reiterated concerns about a frustratingly slow recovery, an imbalance of supply and demand, an overhanging foreclosure problem, tighter lending standards, and high unemployment.
Bernanke summed up his speech with the following statement:
"We need to continue to develop and implement. policies that will help the housing sector get back on its feet. No single solution will be sufficient. But sustained efforts to address the many interlocking factors holding back the housing market will pay dividends in the long run."
Despite a dearth of new fixes for the housing industry, the home builders are enjoying a boom of sorts in the stock market, where some barometers have recently surged to four-year highs.
In the attached video, Mark Luschini, chief investment strategist at Janney Montgomery Scott explains that the recent spike in funds he recommends, like the Dow Jones Construction Fund (ITB) or the Home builders Trust (XHB), is linked to record low inventories and modest improvement on the jobs front.
Since September, private payrolls have grown by an average of 202,000 a month. While that may be lower than what many would like to see, it's good enough to give investors like Luschini confidence that the "underpinnings of stabilization" are happening in housing.
It may take another 6 to 9 months before the housing trend is as visible and acknowledged as the improvement in employment currently is, but the believers in builders are buying ahead of the news.
So far, the construction and builders trade has been unbelievably profitable, but could prove to be equally vulnerable if the jobs-led recovery theme turns out to be built on a foundation of sand.
Do you think housing has bottomed out yet or do you need to see more proof before buying into the builders? Let us know in the comment section below.