D.R. Horton(DHI)who sells more homes than any other homebuilder posted earnings for the second-quarter. They sold 22% more houses compared to the same period last year and they made 7% more for similar models. The stock is up 17% for the year. It is even higher now.
Their competition, Lennar(LEN) is also doing well.
USG Corporation(USG)thinks so. The largest drywall distributer had huge profits. USG's stock is up 10% this year. It too is even higher.
Another company gaining on home sales is cabinet maker, American Woodmark(AMWD). It's stock has surged 62%. Wow!
All of the above point to the housing recovery except for one little, no, make that a big thorn. According to the Census Bureau, the homeownership percentages has declined to 63.4% from the peak in 2004 of 69.2%. It has fallen every year from the peak and is testing its lows from way back in 1965 when LBJ instituted the "Great Society." This story has not changed. Housing is unaffordable and rents are insufferable!
This is a Conundrum.
Home ownership is at 50 year lows while builders and suppliers are doing well in 2015. Prices in 2018 continue to rise. Why or how can this be?
that house flippers changed their approach from straight demand to buying distressed properties, repairing them and then, reselling. This is a new segment in our economy.
We also know that large hedge funds entered the fray to capitalize on low, distressed properties and then, renting them. Rents have risen every year from the financial crisis in 2008. Blackstone Group(BX)has purchased over 50K units since 2012 and they were buying selectively even before that time.
We also know that the average medium home price is rising in all parts of the country. Real estate varies by location, however in the Northeast it is over $240K. In the Midwest it is over $163K. In the South it is over $188K and in the West it is beyond $305K. The average new home costs well over $328K. This is a new all-time high. Together, this spells trouble. Why, you ask? Because this is the same type of price action that led to the financial crisis in 2008. Prices are too high in relation to wages which remain stagnant and new revelations are pointing to dark clouds approaching. This cloud is still out there and prices are even higher as we roll into 2018.
are losing money on low-end properties and more and more are turning to million dollar investments. This segment has no financing problems, but buyers are demanding and most importantly, are a small percentage of customers. If you can't sell, the flipper has to make a large payment and he has limited resources. Big future problem.
Blackstone is slowly thinning its portfolio because they realize that baby boomers are retiring and downsizing which means more properties on the market. At present, it has been a seller's market, but the ratio is changing, rapidly.
If you like a second opinion, I have Dr. Copper here. Look what his chart is saying along with Mr. Lumber.