Whistling Past Housing's Graveyard?
Builders' Shares Have Been Hot,
Sparking Debate Among Investors
On Whether Sector Has Hit Bottom
Home-builder stocks are bucking a trend -- one that has the rest of the housing industry in a tizzy.
The Dow Jones Wilshire U.S. Home Construction Index of home-builder stocks has increased about 15% since July 18 -- even as each passing week shows the nation's housing statistics heading down. While the index is still down for the year, that recent rise has outpaced broader market indexes and set off a debate among investors about whether the slowdown might end sooner for the home builders than many expect.
BRICK BY BRICK
? See a graphic look behind the housing indicators.
Some bulls believe builder stocks hit a bottom toward the end of July, around the time that the Federal Reserve signaled it was considering a pause in its two-year campaign of interest-rate increases. Since the housing sector is so sensitive to mortgage rates, the signal mattered to home builders. The question now is whether the Fed's pause -- and a recent drop in long-term interest rates -- will be enough to bolster a sector so exposed to a housing slowdown that seems to be getting worse.
According to the National Association of Realtors, sales of existing homes were down 12.6% in August from a year earlier, and the median price of homes sold dropped 1.7% over that period -- the first year-to-year price decline in 11 years. Sales of new homes were down 17.4% in August from a year ago, according to the Census Bureau.
Some stocks seem unfazed by the headlines. For instance, shares of Lennar Corp., which reported on Sept. 8 that it was reducing third-quarter earnings estimates because of the continued housing slump, have risen roughly 6% since then. In 4 p.m. trading Friday on the New York Stock Exchange, Lennar's shares were down 52 cents to $45.12, giving the company a market value of $7.26 billion.
"If the sector stops going down with bad news, it may imply that it has found a bottom," says John Buckingham, chief executive of Al Frank Asset Management, which has $800 million under management and whose investment newsletter, the Prudent Speculator, has recommended more builder shares in recent months. But Mr. Buckingham says his funds haven't added to their home-building stake recently.
These are volatile stocks and bears believe the recent gains could easily be reversed as the housing market continues to slide. Banc of America Securities analyst Daniel Oppenheim last week downgraded Pulte Homes Inc. to "sell" from "neutral" and D.R. Horton, to "neutral" from "buy," citing the recent appreciation of their stocks.
But some bulls aren't dissuaded. Citigroup analyst Stephen Kim declared in a report last month that it is "a buyer's market" for the stocks. Josh Spencer, an analyst who covers the home-building sector at T. Rowe Price in Baltimore, says builder stocks are too inexpensive to pass up.
Even after their rally, many builders trade slightly above their book value, which is a company's assets minus its liabilities, and is often regarded as a rough estimate of how a business would be valued if liquidated. The big players like Pulte, Lennar, Horton and Toll Brothers also trade at less than six times earnings, based on the four most recent quarters of results.
"All historical metrics tell you [to] buy the stocks here," says Mr. Spencer, who says his firm has increased its home-builder holdings in recent months.
Besides being cheap, the bulls argue home-builder inventories may have peaked in some markets. And the pull back in interest rates could help renew demand.
Citigroup's Mr. Kim, whose firm has investment-banking relationships with several home builders, says the stocks could get a boost when the companies report fourth-quarter earnings because cancellations on orders for new homes could decrease and the year-over-year comparisons will be easier. By the first quarter of next year, he believes cancellation rates will be lower and order trends will be better than the first quarter of 2006.
Yet trying to time a rebound in this sector is an extraordinarily risky game, because the fundamentals of the overall market still look so weak, even to the builders. Many builders aren't giving earnings guidance for next year because the outlook is so murky. Moreover, builders are still using incentives to lure in buyers, which eat into their profit margins. A report by Moody's Economy.com said house prices could keep falling until 2008 or 2009 in some areas. Private-equity groups -- investment pools that look for companies they can buy on the cheap, fix up and resell -- have been looking at the battered sector, but are expected to hold off taking any companies private until the housing market bottoms and begins to stabilize.
"We are in uncharted waters and you just don't know if there is reef ahead," says Edgar Wachenheim III, chairman of Greenhaven Associates, a Purchase, N.Y., investment firm, with $3.5 billion in assets under management, who sold off his builder stocks a year ago and is staying away from the sector. "I don't know how any reasonable person can know where the stocks are going to go."
Another dark cloud over the sector is the threat that builders' land holdings will lose value as land prices decline. That could mean that some land may be worth less than they paid for it. The bulls counter that the land issue is overstated because builders are increasingly using options, which allows them to walk away from land deals and minimize their losses.
Some problems may lie ahead when builders construct more houses on land they bought more recently at higher prices. As of the end of last year, 28% of land owned by home builders was negotiated in 2004 and 2005, 46% in 2003, when land prices started to take off, and 26% in earlier years, according to a report by analyst Ivy Zelman of Credit Suisse, which does business with several home builders.
Last week, Ms. Zelman downgraded Horton to "neutral" from "outperform" after estimating that 48% of its owned land is at prices negotiated in 2004 and 2005. Meantime, she upgraded MDC Holdings Inc. from "neutral" to "outperform," citing its relatively short supply of land.
房屋建筑类股逆势上扬引发争议
住宅房地产行业风声鹤唳，但房屋建筑类股却在逆市上扬。
跟踪住房建筑商类股的道琼斯威尔希尔美国住房建筑分类指数(The Dow Jones Wilshire U.S. Home Construction Index)自7月18日以来上涨了约15%，不过每周的统计数据几乎都显示美国住房市场的情况在恶化。虽然该指数仍低于年初的水平，但近期的上涨幅度却大于大盘，这也在分投资者中引发了争论：住房建筑市场增长放缓的局面是否要比许多人预计的提早结束？
部分乐观人士认为，美国联邦储备委员会(Federal Reserve, 简称：Fed)在7月下旬表示正在考虑暂停已持续两年的加息周期，而建筑类股也基本在此时触底。由于住房市场对抵押贷款利率非常敏感，Fed这个信号显然将影响到房屋建筑商。目前的问题是，Fed暂停加息──以及近期长期利率的下降──在房屋市场日渐疲软的情况下是否足以推动房屋建筑类股继续上扬。
根据美国全国地产经纪商协会(National Association of Realtors)的数据，8月的成屋销售较上年同期下降了12.6%，已售房屋价格中值同期下降了1.7%，这是11年以来按年比较价格的首次下降。据人口普查局(Census Bureau)，美国8月份预售屋销量较上年同期下降17.4%。
一些房屋建筑类股似乎并没有受到这些负面消息的影响。比如，Lennar Corp.在9月8日公布称，由于受房地产市场持续疲软的影响它将调低第三季度的收益预测。但自此之后其股价上升了约6%。Lennar股票在纽约证交所上周五收盘时下跌52美分，至45.12美元，该公司市值为72.6亿美元。
Al Frank Asset Management的首席执行长约翰?白金汉(John Buckingham)说：“如果房屋建筑类股不再因不利消息而继续下跌，这或许表明此类股票已经触底。”Al Frank Asset Management管理着8亿美元资产，该公司的投资通讯“the Prudent Speculator”在最近几个月推荐的房屋建筑类股数量有所增加。但是白金汉称，他的基金最近还没有增持房屋建筑类股。
房屋建筑类股价格起伏较大。市场悲观人士认为，随着住房市场继续下滑，房屋建筑类股最近的反弹势头很容易就会被扭转。美银证券(Banc of America Securitie)的分析师丹尼尔?奥本海姆(Daniel Oppenheim)上周把对Pulte Homes Inc.的评级从“中性”下调至“卖出”，把D.R. Horton从“买入”下调至“中性”，原因是这些股票最近有所上涨。
但是一些乐观人士并没有因此退却。花旗集团(Citigroup)分析师斯蒂芬?金(Stephen Kim)上个月在一份报告中称，房屋建筑类股处于一个“买方市场”。T. Rowe Price研究房屋建筑类股的分析师乔西?斯潘塞(Josh Spencer)说，房屋建筑类股价格如此低，投资者绝对不能错过。
即使房屋建筑类股最近回升，但很多此类股票的价格也只仅仅略高于其帐面价值。帐面价值就是公司资产与负债的差额，通常被看作是公司进行清算时的粗略估价标准。基于Pulte、Lennar、Horton以及Toll Brothers等大型房屋建筑商最近几个季度的收益，这四大公司的市盈率都不足6倍。
斯潘塞说：“以往的历史经验都在告诉你要买入这些股票。”他同时表示，他的公司最近几个月增持了房屋建筑类股。
一些乐观人士表示，除了房屋建筑类股价格较低之外，住宅库存数量在某些市场已经见顶。另外，利率下降有助于重新激发市场对房屋的需求。
花旗集团的斯蒂芬?金称，在发布第四季度收益后，房屋建筑类股可能会被推高，因为预售屋的订单取消量会下降，按年的增长率会有所改善。他认为在明年第一季度之前，订单取消率会降低，而且订单情况将好于2006年第一季度。花旗集团与几家房屋建筑商有投资银行业务往来。
然而，试图准确把握房屋建筑类股全面反弹的时机是充满风险的做法，因为市场总体基本面看上去仍然较弱，对房屋建筑商也是一样的。由于前景黯淡，很多房屋建筑商尚未对明年的收益作出预测。另外，房屋建筑商仍然在采用促销手段来吸引买家，但这种做法会降低他们的利润。穆迪(Moody's) Economy.com在一份报告中称，住房价格在2008年前将持续下降，某些地区的价格下降趋势可能会持续到2009年。私人资本运营公司一直十分关注房屋建筑类股，但预计他们在住房市场触底企稳之前不会对这些公司采取任何行动。
“我们像在一片未知的海域内，根本不知道前方是否有暗礁，”纽约州珀切斯投资公司Greenhaven Associates的董事长埃德加?瓦亨海姆(Edgar Wachenheim III)说，“我不知道理性的人如何才能准确预测此类股票的走向。”Greenhaven Associates管理着35亿美元的资产。瓦亨海姆一年前抛售了他所持的房屋建筑类股，之后一直远离此类股票。
另一个笼罩在房屋建筑类股的阴影是：建筑商所拥有的土地会随着土地价格降低而贬值。这就意味着某些土地的价值会低于建筑商购买时所支付的价格。但市场乐观人士反驳说，外界对土地的问题小题大作了，因为建筑商越来越多地使用选择权，这使他们能够不再进行土地交易并将损失降至最低。
建筑商在最近花高价购买的土地上兴建更多的房屋时，还可能出现一些问题。根据瑞士信贷(Credit Suisse)的分析师艾维?泽尔曼(Ivy Zelman)撰写的一份报告，去年底，在房屋建筑商拥有的土地中，28%是在2004年及2005年购得的，46%是在价格刚刚开始上涨的2003年获得的，26%是在更早以前获得的。瑞士信贷与几家房屋建筑商有业务往来。
上周，泽尔曼将Horton的评级从“强于大盘”下调至“中性”，她估计在该公司拥有的土地中，有48%的土地是以2004年和2005年的价位买进的。与此同时，她将MDC Holdings Inc.的评级从“中性”上调至“强于大盘”，称其土地供应相对短缺。
Michael Corkery
