Sector Snap: Gains for homebuilders in 2012

Homebuilder stocks have reached long-time highs in 2012 as housing market has improved

Associated Press

LOS ANGELES (AP) -- Improving home sales and expectations for a gradual but sustained housing recovery propelled shares of homebuilders to their highest prices in years in 2012 following a long slump.

Shares in the 13 publicly traded U.S. builders remain well off their peak prices from 2005, during the housing boom, but they are up an average of more than twofold this year. By comparison, the S&P 500 is up 12 percent in the same period.

Investors have been piling back into homebuilder stocks this year, as sales of new homes have begun to rebound after sinking to historic lows in 2011.

New-home sales are up 15.3 percent over the past year, hitting a seasonally adjusted annual rate of 377,000 in November. And the pace of home construction is nearly 22 percent higher than a year ago, with builders on track to start work on the most homes in four years.

Homebuilders are also feeling more confident about the future. The National Association of Home Builders/Wells Fargo survey, which gauges builder confidence, climbed in December to its highest level in 6½ years. That signals builders are more optimistic that the housing recovery will endure.

Sales trends have been buoyed by stable job gains and record-low mortgage rates. More people are looking to buy or rent a home after living with relatives or friends during and immediately after the Great Recession.

In addition, the excess supply of homes that were built during the housing boom has finally thinned out. Only 149,000 new homes were for sale at the end of November. That's just above a record low of 143,000 in August.

And foreclosures, which can be a drag on the value of nearby homes, have slowed this year. That, plus a thinner slate of homes for sale in many markets, has helped drive home prices higher.

The Standard & Poor's/Case-Shiller national home price index released last week showed an increase of 4.3 percent in October compared with a year earlier.

"The outlook for housing is it will outperform the economy over the next two or three years, unless we have a recession," says Patrick Newport, an economist at IHS Global Insight. "If we have a recession, housing will be hammered."

Still, Newport anticipates that housing won't fully recover before 2015. That's when he expects new home sales will reach 800,000 a year, the pace that economists consider healthy.

Newport's projects that sales of new homes in 2013 will climb 30 percent to 476,000, up from a forecast of 365,000 in 2012.

In addition, he expects builders will break ground on 982,000 homes and apartments in 2013. That represents a 26 percent increase from his 2012 forecast of 778,000.

Hovnanian Enterprises Inc. has seen the biggest stock price gain among homebuilders in 2012. Shares are up by nearly fivefold, earlier this month hitting their highest point since May 2010. The stock rose 2.8 percent to $6.91 in afternoon trading on Monday.

Here are how other builders whose shares have more than doubled over the past year, through Friday's close, were trading on Monday:

— PulteGroup Inc., up 2.2 percent to $17.99. The stock has nearly tripled, and hit a 5-year earlier this month.

— KB Home up 2.5 percent to $15.75. Shares have more than doubled, and in October reached their highest point since May 2010.

— Ryland Group Inc., up 2.3 percent to $36.55. Shares have more than doubled, and earlier this month rose to a 5-year high.

— Standard Pacific Corp., up 3.2 percent to $7.34. Shares have more than doubled. In September, the stock reached a 5-year high.

— M.D.C. Holdings Inc., up 3.8 percent to $36.66. The stock has doubled, and touched a 4-year high in November.

— M/I Homes Inc., up 4.6 to $26.49. Shares have nearly tripled, and on Monday rose to a 5-year high.

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