Investors Inching Back Into Homebuilder Stocks

By Author: David Reinholtz
Total Articles: 48
Comment this article

It may seem like a trite consolation, and some may even question the sanity of certain investors, but in the area of home-builder stocks, there are a few investors who see it as a worthwhile investment, even now. This year has seen home prices rise slightly, on a national average, thanks in large part to the government home-buyer tax credit program, but they are beginning to fall once again. And with the cessation of the home-buyer tax credit, there are fewer buyers willing to dive into the market.

So why would these investors in the home-builder's market feel that it's a worthwhile investment? Why would these individuals, and even corporations, take a chance when there are so many unanswered variables, so many unanswered questions? Why would these select few, brave, daring ones decide that now is the right time to be bullish about this aspect of the market?

Looking at the larger picture

These investors are looking at the larger picture that stands before them. They aren't looking to negative reports coming from the housing industry, they are not looking at how the foreclosure rates are on the rise, ...
... and they aren't concerned with a potential double-dip recession. What these investors -and they are in the great minority, mind you- are looking at is that the economy may double dip, the housing industry may still stall and fall back, but in the long run, it will recover and home prices will eventually rebound.

And that means that looking at home-builder stocks is a positive investment because they are considered quite cheap these days. In fact, the home-builder stocks, on average, have lost more then 80 percent of their value over the past five years. Eighty percent is an enormous amount when one considers what the housing industry was like just a few short years ago.

Right now, people aren't buying new homes

Even though, at the moment, people aren't buying new homes, at least not the way they had been five years ago, these investors still see positive signs throughout the industry. In the current stock market and economy, positive doesn't necessarily mean good news is coming out from all corners. What it means, rather, is that there are far fewer negative events being reported, or that the negative events that are coming out are not as bad as they were some time ago.

Just because people aren't jumping into the housing market as they did in years past doesn't mean that they aren't going to get back into it in the future, whether it's the near future or the distant one.

Lessons learned?

Can it be fair to say, then, that these investors who are being bullish with the home-builder market have learned some valuable lessons of the past? Is it fair to assume that these investors are not looking to make huge dividends within a short amount of time? After all, that seems to be what had been going on with investors for years within the stock market, as well as the housing market; too many people expected high rates of returns on their investments in a short amount of time. People were ‘flipping' houses within a few short months, angling for ten, twenty, even one hundred thousand dollar profits in that period.

Stock investment had the same attitude and while many of those individuals who carried that attitude around with them have been shaken to their core and unwilling to step back into the market at this time, there are those that will continue to expect quick turnarounds on their investments. For these individuals, the bear is their symbol, but for those that are more interested in long-term growth, then being bullish in the home-builder market could be a very wise investment, indeed.

David