Have no particular "take" on them....just based on what I've read about them over and over again, these companies are sitting pretty, financially.
Because they are all very large, multi-region builders, they can make good money regardless of what one or two local real estate markets are doing at any one time, and real estate markets are very local, so they don't rise or fall at the same time all over the country.
My overall take on real estate in general is not to anticipate any great crash, however. Without over-building (and there hasn't been much of that anywhere, from what I've read, except in the commercial real estate sector), there is no speculative bubble to pop. The conditions existing today do not in any way resemble those which precipitated the crash of the early 90s.
Also, it's hard to see any great drop in housing costs for people who are hoping for this. If housing prices were to drop much, but mortgage interest rates go up much, the net benefit to the new homebuyer wouldn't be that great.
The monthly principal and interest payment on a 30-year $250K loan at 6.5 percent is $1,580.
The monthly principal and interest payment on a 30-year $200K loan at 8.5 percent is $1,538.
Not much difference at all.
Some people are speculating that the builders might soon have fewer buyers, however, and that existing homes will sell better, because buyers won't want to risk higher interest rates while waiting 8-10 months for their new homes to be built.
However, it's possible these speculators are over-estimating many buyers' willingness to accept older homes and under-estimating how flexible builders can be in adjusting their marketing to attract new business if they need it.
During the last recession, some big builders opened up new lines of business in the home remodeling industry. If they do this again, they will drive the small-time home renovators straight out of business, because they have the labor pools and cost controls that small companies don't have. So I personally won't bet against the homebuilders, but that's just me. |
