SOURCE: Rothman Research

Rothman Research

June 10, 2010 08:30 ET

A Few Miles Down the Road of Recovery

JOHANNESBURG, SOUTH AFRICA--(Marketwire - June 10, 2010) - -- The housing sector, the epicenter of the one of the darkest financial turmoil the U.S. economy is still recovering from, is believed by many industry experts to have past its bottom and is currently beginning to show signs of improvements. The latest home sales data for April continues to assert encouraging trends making the recent reported rise in pending home sales the third successive month of increase. Whilst the reasons behind those surges were mainly attributed to the homebuyer tax credits which expired at the end of April, and doubts that home sales might go into remission until unemployment levels are contained to more acceptable levels, homebuilders have been reporting what could be sales recovery after the expiration of the federal tax incentives in regions like California, Phoenix and Texas. is a source for investors seeking free information on the Residential Construction industry; investors are encouraged to sign up for free at

More promising news that the housing sector is making steady progress came from KB Homes (NYSE: KBH) and Toll Brothers. The biggest luxury homebuilder in the U.S., Toll brothers, recently acquired new land in Pennsylvania and North Carolina. "Toll Brothers have remained quite passive concerning land purchase in the last four years. If they chose to acquire land when recovery in the residential construction industry is still at an early stage of recovery, this can be an indication that they are foreseeing recovery in the market for the near future," commented Jack Benassi, senior researcher at "Toll is not the only one sharing the philosophy of a recovering housing market in the near term... KB Homes also announced last week that they were buying 664 parcels of land in California. Both those companies are not just acquiring those lands but they have also planned to start building homes on those in 2010." 

*Free downloadable research report on KB Home is available by signing up now at

However, even if clear signs of recuperation sprout here and there within the housing industry, investors still remain cautious of homebuilders' stocks. Industry professionals believe that investors are still tuned to recent operating losses posts from most of the homebuilders in the first quarter earnings season of 2010. Toll brothers reported a loss of $40.4 million in its most recent quarterly earnings result, down from $83.2 million for the same period last year. KB homes also posted a narrow loss for its last quarter. One of the latest residential construction companies to have released its quarterly earnings result is Hovnanian Enterprises Inc. (NYSE: HOV). Early this week, Hovnanian also posted a loss of $0.36 a share, beating the street forecast of a loss of $0.64 cents a share.

Investors are still pretty much disappointed by these companies' results and the residential construction industry as a whole. Some key factors worrying the investors' community are the impact of possible rising interest rates and the current unemployment level on these stocks. However, some companies like Toll Brothers and KB home have stated that they firmly believe that they would be returning to profits by the end of this year. But general feeling in the industry could well be dictated by the saying: "seeing is believing." 

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