A report stating that builders have begun construction last month on the most of the homes and apartments since July 2008, caused shares of home construction supply firms and homebuilders to move up on Tuesday. The data was provided by the Commerce Department and two housing reports, which were positive, indicates that the housing recovery looks promising.
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Last year’s sales dipped very low and hit a record low in decades, but consistently low mortgage rates and a limited supply of homes in many markets have boosted the sales of new and previously occupied homes to cover up for last year’s losses. With the demand for homes going up, the requirement of new home construction as gone up as well, thus proving advantageous to numerous homebuilders and the companies that supply everything from lumber to drywall and flooring.
Apparently, builders broke ground on homes in October at a seasonally adjusted annual rate of 894,000, which is a 3.6% gain from September, spurred by a 10% rise in apartment construction, according to the Commerce Department. Single-family home construction went down 0.2% to an annual rate of 594,000, from their record high last month. But permit applications for building single-family houses is the highest since July 2008.
The National Association of Home Builders/Wells Fargo builder sentiment index went up from 41 last month to 46 on Monday. The index has been doing well since October 2011, when it was 17. It is actually a measure of builders’ confidence in the housing market. As per data from the National Association of Realtors, it has been seen that sales of previously occupied in the U.S. went up 2.1% last month. KeyBanc Capital Markets analyst Kenneth Zener stated that when the housing demand becomes steady, investors will get a lucrative risk-to-reward ratio, even at the stocks' present prices, from the building products and construction materials sector.
In Tuesday’s session, KB Home(NYSE:KBH) shares rose 3.50%, Standard Pacific Corp.(NYSE:SPF) added 7%, Hovnanian Enterprises, Inc.(NYSE:HOV) climbed 6.46%, The Ryland Group, Inc.(NYSE:RYL) surged 6%, Lennar Corporation(NYSE:LEN) added 3.50%.