Homebuilders Speak About the Housing Market

Executives of the largest U.S. homebuilders met yesterday at the 10th Annual Homebuilding Conference sponsored by the New York Society of Security Analysts. Some key comments: Freddie Mac Chief Economist Frank Nothaft said the correction is about two-thirds finished, and that by the second half of '07 home sales would begin rebounding, showing 3% gains by year end. Ara Hovnanian admitted, "the market [hasn't] found a bottom yet," but added, "there are reasons to feel a little more comfortable." Toll Brothers CFO Joel Rassman declined to pick a bottom: "Nobody can know when the bottom is." Lennar CFO Bruce Gross said the slowdown offered developers a change to optimize operations: "In good times, we were all busy growing; as things slow down, we can focus on efficiencies." Commenting on industry consolidation, Rassman said: "I think there's a reason to believe that when the big builders control 50-60% of a market, they'll probably have to eat each other." Homebuilder shares were up in yesterday's trading.
• Sources: AP, Bloomberg, Reuters, Seattle Post Intelligencer
• Related commentary: Housing Prices: The Not-So-Hidden Truth, Bursting the Housing Bubble - SeekingAlpha, Housing Stocks: Watching the RSI, Near a Housing Bottom?, Housing Bubble and Real Estate Market Tracker, Contrarians Moving Into U.S. Housing Stocks. Conference call transcripts: Toll Brothers F4Q06
• Potentially impacted stocks and ETFs: Freddie Mac (FRE), Hovnanian Enterprises Inc. (HOV), Toll Brothers Inc. (TOL), Lennar Corp. (LEN). ETFs: streetTRACKS SPDR Homebuilders ETF (XHB), PowerShares Dyn Building & Construction (PKB), iShares Dow Jones US Home Construction (ITB)

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