SOURCE: Rothman Research

Rothman Research

May 25, 2010 08:25 ET

Housing Sector -- Momentary Optimism or Genuine Recovery?

JOHANNESBURG, SOUTH AFRICA--(Marketwire - May 25, 2010) - - Considering that the weaknesses in the housing sector has been one of the key factors that led the U.S. economy to nosedive into the deepest financial abyss since the Great Depression in the 1930s, housing sales data like the one delivered by the National Association of Realtors yesterday is worthy of praise and some reserved sense of relief. At an unexpected 7.6% surge for the month of April, existing home sales reached 5.8 million which is nearly a 23% increase as compared to April 2009. Whilst sales figures for previously-owned homes were above estimate, industry experts are still divided on the level of recovery this sector is currently trying to portray. With first-time home buyers taking 49% of recorded sales, experts argue that April's surge in existing home sales could be a onetime catalyst as consumers had been taking advantage of the Home Buyer Tax Credit which expired on April 30th, 2010.

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Even if the consensus on the street remains optimistic that the housing sector is coming out of the 2008-2009 financial rubbles, there is still a growing anticipation that the market might retract in the coming few months as a result of the expiration of the $8,000 tax credit for first-time home buyers and the $6,500 tax credit for repeat home buyers. With no tax credit and ongoing mortgage defaults, the housing sector continues to look pretty much volatile from an investor's standpoint. This sentiment dominated yesterday's trading session as homebuilder stocks experienced a slide in their share prices. Pulte Homes Inc. (NYSE: PHM) saw a $0.18 decline while Toll Brothers Inc. (NYSE: TOL) fell by $0.17. 

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The solutions for the persisting issues in the housing sector remain a sharp drop in present unemployment level and an upwards revision of income. These, however, are dependent on how quick the economic recovery goes. So far the U.S. economy seems to be moving forward an inch at a time. 

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