Kicking the stone down the road
The dust has cleared. The election is over, what happens next to the north Texas Real Estate market? In North Texas some are happy with the results, many are not, however life goes on and so does the business of buying and selling homes. Fortunately interest rates are still good and the houses available are priced well even though the number of homes has dwindled. Interest rates are still expected to rise come December, by how much, no one really knows.
I came across this interesting article today at the Wall Street Journal’s MarketWatch website by Jon Markman titled “Where to put your money now that Obama has won – Commentary: There are plenty of choices, some not so obvious”. The article has a section on Real Estate that reads as follows.
Home construction and real estate
The Obama Administration and Federal Reserve targeted the home-building industry for special attention since it is among the few industries that cannot outsource jobs overseas. The industry also provides the best income to workers without college educations. It also has a ripple effect on the economy, as new homes require paint, lumber, furniture, lawn care and the like.
iShares U.S. Home Construction (US:ITB) offers the purest exposure to the industry. It’s up 133% during the Obama term so far, vs. 69% for the S&P 500, and is still very strong. The best individual stocks include Lennar (US:LEN), PulteGroup (US:PHM), Louisiana Pacific (US:LPX) , Eagle Materials (US:EXP) and M/I Homes (US:MHO) among the larger companies as well as peripheral players like lawn-care machinery maker Toro (US:TTC), swimming pool supplier SCP Pool (US:POOL) and carpet maker Mohawk (US:MHK).
Likewise the real estate industry has benefited enormously from policy over the past four years, as quantitative easing has involved directly buying securities that support residential and commercial construction. iShares Real Estate (US:IYR) includes all the major players, including regional shopping malls specialist Simon Properties (US:SPG), which is up a cool 315% since Obama entered the Oval Office and still looks fine. Two new stocks with promise in the red hot mortgage servicing business are Nationstar Financial (US:NSM) and Home Loan Services (US:HLSS).
Most interesting that our President is pumping money into construction materials and home equipment. That is great for building new homes and new developments. The problem is, can the market support such an enterprise. Buyers are needed to purchase these homes plus the fact that flooding the market with homes will lower the price of existing homes placing some owners underwater, meaning they owe more on the home then they can get from a sale. What may be good in the stock market may not always be good in the real world of Real Estate. This also explains the new developments in North Texas. Buyers need the money to buy new homes or else they will sit empty. I hope that this administration has taken this into consideration. See ya down the road.