Improving Housing Market Bodes Well for KB Home and Toll Brothers
The ShinesRooms.com Provides Stock Research on KB Home and Toll Brothers Inc.
NEW YORK, NY -- (Marketwire) -- 01/29/13 -- The U.S. housing market bottomed out at the beginning of 2012 and since then has seen a strong recovery. The improvement in housing market also sparked a rally in homebuilder stocks in 2012. Among the big gainers in the sector last year were KB Home and Toll Brothers. The financial crisis of 2008 began with the collapse of the U.S. housing market. After peaking in 2007, the U.S. housing market plummeted. However, things turned around at the start of 2012. Indeed, data from the housing market over the last few months suggests that the recovery is sustainable.
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The fundamentals for the housing market also look good. Much of excess inventory is now gone. This is confirmed by increasing prices and improving housing starts data. Rents across the U.S. are also rising, which is another sign of recovery. And of course, record low mortgage rates have also helped.
The rate on a 30-year fixed-rate mortgage is currently hovering around 3.5%. More importantly, rates are expected to remain low as the Federal Reserve continues with its aggressive bond buying program to stimulate the economy. Back in September 2012, the Fed had announced a third round of quantitative easing under which it is buying $40 billion of mortgage backed securities every month and will continue to do so until there is a sustained recovery in the labor market.
Given the recovery in the housing market, it is no surprise that homebuilders are having an excellent run. In 2012, shares of KB Home and Toll Brothers rose 135.12% and 58.32%, respectively. And with the housing market expected to continue to improve, homebuilder stocks could see another year of substantial gains.
Last week, KB Home reported its preliminary quarter-to-date net orders for the first fiscal quarter of 2013. The Los Angeles, California-based homebuilder said that its net orders for new homes were 750 quarter-to-date through January 2013, which represents an increase of 54% over the same period last year. Jeffrey Mezger, President and CEO of KB Home, said that the company has seen a measureable increase in its first quarter net orders as compared to the same period last year and the trend reflects the ongoing improvement in the housing market and the company's focused execution of its strategic growth initiatives.
Last month, Toll Brothers CEO Douglas C. Yearly Jr. stated that pent-up demand, rising home prices, low interest rates, and improving consumer confidence motivated buyers to return to the housing market in 2012. For its last reported quarter, Toll Brothers posted net income of $487.1 million for the fiscal year ended October 31, 2012, significantly above the $39.8 million reported in fiscal 2011. The company delivered 3,286 units during the year, up 26% from fiscal 2011. Douglas Yearly said that as the economy slowly heals and more customers re-enter the housing market, the company looks forward to the future. He added that based on the company's strong balance sheet, solid land holdings, recognized brand and excellent team of associates, he believes that the company is well-positioned for the housing market's continuing recovery.
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