By Julie Schmit, USA TODAY
Recovery is expected to be slow, and home prices are widely expected to fall this year. But investors are betting on the start of an upturn, bidding up home builder stocks and causing them to outperform the broader stock market.
Chief executives are more positive. JPMorgan Chase’s Jamie Dimon said last week that housing is near its bottom but could stay there a year. Stuart Miller, CEO of home builder Lennar, said the market has started to stabilize because of low prices and record-low interest rates.
Market researcher RBC Capital Markets has also turned from a “bearish” view on housing to saying that 2012 “will mark a step in the right direction.”
“This year will feel a lot better to builders, investors and real estate agents than to consumers,” says Jed Kolko, economist for real estate website Trulia.
Housing’s outlook is brightening with signs of a better economy. Last month, U.S. employers added 200,000 jobs, and the unemployment rate fell to 8.5%, lowest in nearly three years.
While an economic shock could derail progress, “there’s now more evidence of improvement in the economy, and housing will follow the economy,” says David Crowe, chief economist at the National Association of Home Builders. More improvement is expected for:
•Sales. Existing home sales will rise 12% this year after a 2% increase last year, and new home sales, coming off a horrid year, will jump 74% this year, Moody’s Analytics predicts.
November’s existing home sales hit their highest mark in 10 months, and new home sales were the year’s second best, IHS Global Insight says.
•Construction. Single-family housing starts will rise 37% this year, Moody’s predicts, after falling 9% last year.
Home builder stocks are on a run. The S&P 1500 homebuilding index is up 38% since mid-October, vs. 7% for the S&P 500.
