|
COPYRIGHT 2003 Adams Business Media
In the first five months of 2003, home-construction stocks advanced by more than 30%, driven largely by the lowest mortgage interest rates in recorded history. "Going forward, investors have to think about not just mortgage rates but employment rates," insists Merrill Lynch Homebuilding Analyst Joseph Sroka. "You need to look at both factors together."
To be sure, no matter how low mortgage rates go, people must have jobs to qualify for home loans. Yet homebuilders' stocks haven't suffered during recent massive layoffs and rising unemployment. "Employment has worsened over the past couple years," Sroka concedes, "but mortgage rates have compensated. Now we're up to about six percent unemployment but that's still relatively good, especially in conjunction with advantageous mortgage rates of about 5.5%."
Beyond these rates, Sroka points to several other advantageous factors. First, homebuilders have been able to capture significant market share gains --a "huge driver," he says. What's more, the best ones are doing it more wisely than in the past. "Roughly 80% of homebuilders in America are small, private operations. They are terribly under-capitalized. The handful of big competitors are able to secure long-term financing to maintain balance-sheet strength while expanding. And...
Read the full article for free courtesy of your local library.
|
Bookmark this article
Print this article
Link to this article
Email this article
Digg It!
Add to del.icio.us
RSS
