CHICAGO, Sept. 27, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: D.R. Horton (NYSE: DHI), Berkshire Hathaway (NYSE: BRK.B), Masco (NYSE: MAS), USG (NYSE: USG) and Plum Creek Timber (NYSE: PCL).
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Here are highlights from Monday's Analyst Blog:
New Home Sales Down Slightly
New Home Sales in August fell by 2.3% from July to a rate of 295,000. Relative to a year ago, sales are up 6.1%.
While the year-over-year rebound is more than welcome, it is still a very dismal rate of new home sales. However, there was an upward revision to the July numbers of 4,000 to 302,000. Thus, relative to where we thought we were, it could be seen as a 1.0% decrease. The August level was also slightly better than the expected rate of 295,000.
Regardless of the changes at the edges, this is still a very bad level. The 16 lowest months on record (back to 1963) for new home sales have all been in the last 16 months. New home sales have only exceeded the 400,000 level three times since September of 2008 when the financial markets collapsed. The most recent time was in April 2010 as sales were inflated by the rush to get in under the wire and collect the homebuyer tax credit. Sales collapsed after that, and August comp is thus a relatively easy one (although the effect was bigger in June and July).
Relative to the peak of the housing bubble (July '05, 1.389 million) new home sales are down 78.8%. Prior to September 2008, there had only been 20 months in which new home sales were below the 400,000 level, with the most recent being in 1982 (a very nasty recession brought on by sky high interest rates inflicted by the Fed to break the back of inflation).
The graph below shows the history of new homes sales (blue, left scale) along with the growth in population (red, right scale), since presumably if you have more people, you will need more places for them to live.
New Home Sales fall sharply before all recessions (with the exception of the dot.com bust caused recession of 2001) and then start to increase sharply in the middle of, or towards the end of, the recession. That clearly is not happening this time around.
If you want to know why the recovery has been anemic so far, look no further than the graph above! New home sales are vital to the overall economy. If new homes are not selling, then homebuilders have no reason to build more of them. After all, that is very expensive inventory to sit on.
Unlike used home sales, each new home built creates a huge amount of economic activity. Not only are low new home sales bad for the big homebuilders like D.R. Horton (NYSE: DHI), but also for all the companies that make the products and supplies that go into making a new house. They range from Berkshire Hathaway (NYSE: BRK.B) for bricks, roofing materials and insulation to Masco (NYSE: MAS) for plumbing fixtures and cabinets to USG (NYSE: USG) for wallboard to Plum Creek Timber (NYSE: PCL) for lumber.
In terms of employment, it is not just all the roofers and framers that lose jobs due to weak new home sales, but employees at all the firms that make the stuff that goes into making a new home. Of course, if those employees are out of work, they are not spending on other goods and services dragging down a host of seemingly unrelated businesses.
Not that the direct impact of construction jobs should be underestimated. Since the recession started, 31% jobs lost have come from the construction industry.
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