Housing Continues To Steadily Improve

Includes: LEN, PHM, RYL, TOL, XHB
by: David Sims

This morning the Federal Housing Finance Administration (FHFA) released their Housing Price Index for June and the 2nd Quarter of 2012. Housing prices rose 0.7% from May to June 2012.

From the 1st Quarter of 2012 to the 2nd Quarter prices rose 1.8%.

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Also, the Census Bureau released their New Home Sales figures around the same time. Actual new home sales for July were 372,000, a 25.3% increase over the prior year. Analysts had expected 368,000 new home sales for July. In the prior period of June, 350,000 new home sales were reported.

Toll Brothers (NYSE:TOL) reported on Wednesday that its 3rd Quarter profit rose 46 percent with future indicators looking good. CEO Douglas Yearly said "We are enjoying the most sustained demand we've experienced in over five years." He added that the housing recovery is being driven by three main factors; low interest rates, attractive home prices and pent-up demand.

Yesterday, July Existing Home Sales, as reported by the National Association of Realtors (NAR), jumped to 4.47 million units. This amount represented a 10.4% increase versus the prior year and continuous improvement month over month from June's figure of 4.37 million. As they did in the prior month, the NAR reiterated that inventory levels remain tight in many areas of the country.

Lawrence Yun, NAR chief economist, added, "Mortgage interest rates have been at record lows this year while rents have been rising at faster rates. Combined, these factors are helping to unleash a pent-up demand. However, the market is constrained by unnecessarily tight lending standards and shrinking inventory supplies, so housing could easily be much stronger without these abnormal frictions."

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All the good news in housing has sent housing stocks much higher over the past year. The SPDR S&P Homebuilders (NYSEARCA:XHB) nearly reached a 52-week high yesterday, with many components, such as PulteGroup, Inc. (NYSE:PHM), Ryland Group Inc. (NYSE:RYL), and Lennar Corp. (NYSE:LEN) performing similarly.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.