Housing Gets a Boost
Mary is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The housing market in general has seen signs of improvement recently. The National Association of Home Builders reported recently that its confidence index experienced the biggest monthly jump in July in almost a decade. Builders are expecting to sell more homes and the Commerce Department also reported that home building in June rose to the highest level in almost four years.
NVR (NYSE: NVR) certainly falls in line with these reports. It recently posted a second quarter profit increase of 22% to $46.8 million. Their home-building segment poster higher revenue and closings, and results are projecting solid future business. NVR is one of the housing industry’s biggest players and it has raised expectations as it remained profitable during the downturn. This was helped in part due to their limited ownership of land and a focus on some of the stronger housing markets. In addition to home building, NVR also operates in mortgage banking. The home building unit constructs and sells the homes. The mortgage unit finances the homes.
Not every home building company is faring so well, however. DR Horton (NYSE: DHI) was recently downgraded to underperform by Raymond James. The firm stated that the company has “the most exposure to entry-level buyers, which we believe are continuing to face difficulty meeting the stringent qualification standards being imposed on new mortgage underwriting.” Still, the stock is up approximately 50% this year.
Ryland Group (NYSE: RYL) also competes in the housing market. This home builder has fared well in lieu of the current economic climate. Their stock’s shares have more than tripled since the third quarter of 2011. Also, better housing revenues and solid cost management are leading to narrower losses per share. The stock has been rising consistently and even reached its 52-week high this month. In its 45 years of existence, the company has built over 295,000 homes.
Similarly, banks that have reported recent earnings have also reported upbeat results tied to the housing market. Wells Fargo, the nation’s largest mortgage company, stated revenue from mortgage banking has increased 80% from the year prior. JP Morgan and Citigroup have also reported an increase in their mortgage business. As confidence in the housing market increases, home builders will continue constructing. As long as the mortgage numbers stay high, this should be of great relief for companies such as NVR, DR Horton, and Ryland, that depend on consumer mortgages to keep their businesses afloat.
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