Homebuilder stocks had soared in 2012 in the early stages of the housing recovery, but have since leveled off and had perhaps peaked earlier this year.
Then Thursday, major homebuilder stocks plunged amid fears of rising mortgage rates.
The declines came a day after the Federal Reserve suggested it may reduce the bond buying that has pumped up equity markets for more than a year.
Experts noted that homebuilder stocks are particularly sensitive to rising interest rates.
With rising rates, said Money Morning Chief Investment Strategist Keith Fitz-Gerald, "The homebuilders are going to have to do one of two things: They're either going to have to stop building because there's no demand or they're going have to lower their prices, which is going to hurt their profit margin."
Eisman: Best Housing Stocks to Buy in 2013
In New York City last week investors from around the country gathered for the Ira Sohn Conference to pitch their lists of the best stocks to buy in 2013.
One of the more interesting presentations this year featured Steve Eisman of Emrys Partners, who gave a presentation that was very bullish on the prospects for the U.S. housing market.
While many investors have proffered opinions of the strength and validity of housing market performance, investors should pay especially close attention to Eisman when he speaks on the subject.
Eisman has shown he knows how to evaluate and profit from this market. He successfully profited from the market top in 2007.
Eisman was featured in Michael Lewis' book on subprime mortgages, "The Big Short," as one of the investors who made huge bets against the housing market at the top of the bubble and raked in billions of profits.
Now, he's picking the bottom. If he's right again, the profits could be just as large on the upside as they were during the collapse.
In his Ira Sohn presentation, Eisman pointed out that monthly payments as a percentage of income for mortgages is at an all-time low of just 14% and inventories of available homes are at a multi-year low. He thinks the growth is just beginning, and aided by very low interest rates we could see strong growth in the industry for several years.
He listed several of the best housing stocks to buy that would allow investors to profit from this continued recovery.
He favors home builders that have substantial land inventory as we go into the recovery. Those builders who have built up their land holdings over the past couple of year should amass substantial profits form reselling land purchased on the cheap.
Here are three housing stocks to buy in 2013, according to Eisman, including what he calls the "most powerful" play in the sector this year.Read More...
U.S. Housing Market: 5 Things Every Homebuyer Needs to Know Right Now
The U.S. housing market's recovery is gaining momentum, but there are still a number of issues for homebuyers to be cautious of.
To get to the bottom of what's really going on in the housing market, we talked to Gerri Willis, author of "Home Rich" and host of FOX Business Network's The Willis Report (6 p.m. weekdays), about the key things homebuyers need to know in today's challenging market.Read More...
U.S. Housing Market Recovery Just Rescued 4 Million Homeowners
In further signs of a U.S. housing market recovery, home prices are up - meaning a whopping 33% fewer homeowners are underwater.
When the U.S. housing market bottomed out in 2008, nearly one in six homeowners owed more on mortgages than their homes were worth. That translated to 12 million underwater homeowners.
But the outlook has improved considerably.
That's because home prices, which peaked in 2007, rose 7.4% in November from a year ago, according to real estate firm CoreLogic. That's the largest year-over-year increase since 2006, when the housing industry was nearing its peak.
As home values rose, the number of "underwater" borrowers fell last year by almost 4 million, and that total could drop to 4 million within two years, according to JPMorgan Chase & Co. (NYSE: JPM).
That's good news not only for the housing industry, but for the entire economy.
"For most middle class households, homes are by far their biggest asset," Karen Weaver, head of market strategy and research at investment firm Seer Capital Management LP told Bloomberg News. "So once the housing market starts to recover it helps consumer spending, it helps the whole economy."Read More...