Stephen Rosenman's  Instablog

    When will housing come back?  One year, two, three, four, five? Who knows?  A better question to ask is: will housing come back?  That's easier to answer. First, there is a strong and dedicated political will to keep mortgage rates low,  continue housing tax incentives, forestall foreclosures, get unemployment numbers down, all of which will help the industry. Politicians know the importance of this sector: their constituency's jobs and savings are tied to housing.  Second, the companies are doing everything they can to recover:  cut costs, write down losses, buy back debt at bargain basement prices (for example, BZH and HOV recently bought back a ton of debt).  Finally, at some point, the demand supply equation will shift toward the builders. After all, you have to live somewhere.  Who will  build the homes?  The small private builders have been taken out.  There are no foreign companies equivalent to a Kia or Hyundai or Toyota  to take market share from U.S. builders.  The beaten down publicly traded home builders will be the only players and they will  bounce back.  Four years ago, KBH, BZH, HOV, SPF, LEN were trading at $83, $79, $72, $48, and $67 respectively; now they go for $15, $5, $4, $3, and $14.  Even if they only recover to eighty per cent of their former values, you get a 4 - 14 X bagger.  Not a bad gain.  Most people would be willing to wait for those kind of returns even it takes one year or five.

Long BZH