5 Reasons Why the Housing Market Recovery Won't Last

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Toll BrothersInvestors seem to be loving homebuilders these days.

Shares of Lennar (LEN) hit a five-year high last week. Toll Brothers (TOL) followed through fresh five-year peak on Monday.

It's easy to get excited about the bellwethers. Home prices have finally started to inch higher. Developers are growing their bottom lines and their cancellation rates are shrinking. There may be a few laggards out there, but the trend is generally upbeat.

Analysts see Lennar and Toll Brothers growing their revenue 26% and 23% respectively this year, and are looking for those rates to accelerate in the next fiscal year.

However, hold your applause: It may be too early to start calling this an actual housing recovery.

Yes, homebuilder stocks have bounced back. But there are plenty of favorable tailwinds that can whirl back around and become battering headwinds pretty soon.



Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article.


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59 Comments

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McLean

Tech stock bubble, housing bubble, gold bubble, bonds bubble, what's next?

September 13 2012 at 2:50 PM Report abuse rate up rate down Reply
combatpainter

Another article that is just republican propaganda. Everything good is fleeting.Obama is satan. Democracy is kaput. The democrates will cause the apocalypse-YAWN....

September 13 2012 at 7:50 AM Report abuse rate up rate down Reply
talari

Also, GM's failure was only postponed. Borrowed money only creates an illusion of prosperity. Time to pay off the loans, everybody.

September 13 2012 at 1:00 AM Report abuse +1 rate up rate down Reply
raydelv

This is why the housing market is going to take a very long time to come back. Banks raised their standards on home loans. Many people who were within the age bracket of purchasing a home, either lost their homes because they lost their jobs, or were laid off. There are jobs being created but they are mostly in sales and service, these jobs tend to be low earning jobs. Many may not get another home loan for a long time because their credit was damaged Many of the young people from the college graduating clas of 2010, 2011 and 2012 have moved back into their parents homes because they can't find jobs. We have a high inventory of homes and low inventory of people who can afford a home.

September 13 2012 at 12:56 AM Report abuse +3 rate up rate down Reply
Duane Wilson

"Recovery" won't last because it never started. A few upbeats in a few scattered Markets does not constitute a recovery. The variable rates haven't completely kicked in and the bottom hasn't been hit yet. Commercial property is still on the "to do" list for collapse.

September 12 2012 at 11:22 PM Report abuse +3 rate up rate down Reply
ectullis

Recovery what recovery?

September 12 2012 at 11:13 PM Report abuse +2 rate up rate down Reply
Joe

All good reasons that this writer who is scaring the dickens out of everyone should now take the devil's advocate role and give us 5 good reasons that the housing market might recover, but I will give him a head start. number 1 we owe 16 trillion dollars to almost every country on Earth, so it is in the USA's interest to get the interest rates as low as possible as we will go bankrupt if interest rates rise too high. I will now give him another one, change the Immigration policy to allow the best and the brightest college graduates with specialized training and skills to remain here on a party toward obtaining citizenship plus drill for oil and natural gas as well as mineral deposits to create energy independence and plenty of jobs that enable more housing to be bought and new ones built.
Third, Congress screwed up in the early 90's causing the failure of all Savings and Loans by increasing the building depreciation schedule from 15 to 29 years in one fatal swoop and even increased again later. Eliminate the mortgage interest and really see a lean over and kiss your rear end GOOD BYE. Can they be that stupid again?

September 12 2012 at 10:23 PM Report abuse rate up rate down Reply
stealcity

Yep, just keep paying out for rent, after 20 years miss a month and your OUT.

September 12 2012 at 9:46 PM Report abuse rate up rate down Reply
2 replies to stealcity's comment
cslinz62

You are so wrong about that. My apt. complex works with folks. Yeah, well, pay on a mortgage 29 & a half yrs., get sick & can't pay your dr. bill, get a lien put against your house and then lose it. YOUR TURN!

September 12 2012 at 10:31 PM Report abuse rate up rate down Reply
cslinz62

You are so wrong about that. My apt. complex works with folks. Yeah, well, pay on a mortgage 29 & a half yrs., get sick & can't pay your dr. bill, get a lien put against your house and then lose it. YOUR TURN!

September 12 2012 at 10:31 PM Report abuse rate up rate down Reply
fred

Build more homes in forrest fire prone areas-that always made as much sense as building 'em in hurricane prone areas (and watch the looks on the people's faces when they say "The government should do something about this).

September 12 2012 at 9:43 PM Report abuse rate up rate down Reply
kafienkarl

Google and/or YouTube: Bushes comments regarding the "owneship society" don't think he had anything to do with the foreclosure mess that was occurring in 2007 up to now.

September 12 2012 at 9:34 PM Report abuse +1 rate up rate down Reply