Buy U.S. housing and sell Canada? RBC Capital makes a pair trade, upgrading D.R. Horton (DHI +0.6%) to Outperform while downgrading Canada-based Brookfield Residential Properties (BRP -2.1%) to Sector Perform.
The Dow Jones U.S. Home Construction ETF (ITB +2.6%) gains following earnings reports from Lennar (LEN +5%) and KB Home (KBH +4.5%) - both of which showed interest rate hikes taking at least some bite out of results. Also, Case-Shiller data pointed to a slight slowing in home price increases. Homebuilders have been knocked for a loop since rates started going up in May - perhaps some sell the rumor, buy the news action is warranted today.
In other homebuilder news, RBC Capital initiates coverage on Brookfield Residential Properties (BRP +4.1%) with a Buy and $27 price target.
Weyerhaeuser's (WY) homebuilding division is attracting interest from Brookfield Residential Properties (BRP), the land developer and home builder controlled by Brookfield Asset Management (BAM), WSJ reports.
Weyerhaeuser Real Estate Co. executives reportedly have met with bidders to answer questions about its operations; while some bidders are interested in only a portion of the unit, BRP is said to be interested in buying the entire group.
BAM's size - $180B in assets - might prove an advantage vs. other interested parties since WY wants to sell the homebuilding division in a reverse Morris trust, a tax-free method of spinning off a division to be merged with an acquirer.
Brookfield Residential (BRP +5.3%) shoots higher after a positive presentation from Mick McGuire at the Value Investing Congress. BRP boasts 30 years' worth of undervalued property, says Marcato Capital's McGuire; he also likes Alexander & Baldwin (ALEX -2.4%) and GenCorp (GY +3.4%) on the basis of their undervalued real estate assets.
Previously bearish big players are betting on a rebound in housing, buying the stocks and bonds of builders such as Pulte (PHM), Beazer (BZH), and Hovnanian (HOV). Ivy Zelman switches sides as well, believing higher rents will push would-be buyers out of their apartments. "The smartest money in the world has been carried out on stretchers betting on a true recovery for housing," cautions Mark Hanson.
Home builders expect to start on 575K single-family homes this year - up 21% from 2010, but a far cry from 2005's 1.7M. Housing doesn't really look less shaky, and that NAHB forecast has a big assumption: that job growth gets more consistent.
Brookfield Properties (BPO) is combining some of its assets with Brookfield Homes (BHS) to form a new company called Brookfield Residential Properties Inc. Brookfield Residential will hold $2.5B in assets, have an equity value of $1B, and will apply to trade on the New York and Toronto stock exchanges. (PR)
Consumers have stopped paying mortgages so that they can cover other bills, says Meredith Whitney on CNBC, leaving banks with rotting assets and a mounting foreclosure problem. A double dip is coming in housing, "no doubt about it."