Home building sector shows strong gains as market recovers

As recently reported, the US housing market is continuing its slow recovery from the subprime crisis that helped to kick-off the global financial crisis.  “It’s not a straight line, there will be some bumps, but the market is slowly recovering” said the chairman of the National Association of Home Builders, Barry Rutenberg.

According to the Home Builder’s index, which is compiled by Standard & Poor, there is a 50% jump over 2012 to date. This represents a rise almost 500 times that which was seen on the S&P 500 index.  Other building firms are seeing rises as well, with Toll Brothers, Lennar and DR Horton all posting strongly.

Data is showing that more and more Americans are becoming willing to enter back in to the property market, causing both demand and prices to rise.  Low mortgage rates are part of the reason, but as the economy recovers people are starting to have faith in the market again.  For the first time since the 1950s the interest rate of a 30-year fixed mortgage fell below 3.5%.

An analyst commented: “New home sales have been higher than expected and orders and pricing too have been strong, pointing to a year on year improvement in the housing market. This is what is driving the stocks.” Another expert added: “Investors are confident that the housing market has reached a bottom. They believe the new orders growth rate is sustainable and that it may even accelerate.”

In fact, home building is recovering is such a fashion that Goldman Sachs upgraded its view of the industry to ‘attractive’ from its previous position of ‘neutral’, indicating that the recovery is indeed well underway.