Beazer Homes USA, Inc. (BZH) and Hovnanian Enterprises, Inc. (HOV) up despite horrid housing news
It’s Keynesian economics at its finest: Govenment CAN spend a sector out of a slump… as long as it keeps paying people to spend! Could home builders like Beazer Homes (NYSE:BZH) and Hovnanian Enterprises (NYSE:HOV) be rising on anticipated subsidies?
By J. Christoph Amberger
Baltimore, MD: Let’s hear it for government spending the economy out of recession!
Sales of existing homes plunged by more than 40 years in December — more than 12% last year. That’s the sharpest fall since the Great Depression.
Total sales for 2009 ended up about 5% over 2008 levels. And that was with the beefed-up tax credits for first-time buyers.
Of course, just like its brother-in-spirit, the Cash for Clunkers program, the government’s decision of having my taxes subsidize other people’s home purchases on a larger scale than before created its own numerical distortion in the statistics: It condensed sales within the application time frame, setting up the steep collapse right when the expectations of meeting filing deadlines withered.
(Strangely enough, the shares of homebuilders like Beazer Homes USA, Inc. (NYSE:BZH) and Hovnanian Enterprises, Inc. (NYSE:HOV) were trading up over 3% today!)
They may have extended the program, buying further “success stories” of government intervention in the weeks ahead. But another expiration deadline is already lurking in the background. On March 31, the Federal Reserve will end its program to buy mortgage securities to keep home loan rates low. Mortgage rates could rise. They should — since in the era of rampant unemployment, the risk inherent of granting a mortgage even to the gainfully employed is certainly worth more than 6% p.a.
The second round of home buyer tax credit is scheduled to run out at the end of April.
Artificial demand for homes generated by the tax credit and low mortgage rates thus far has prevented real estate prices in many areas from collapsing entirely. Or better, it has delayed that progress.
My suggestion to the White House: Instead of tinkling the money away piecemeal, cut the red tape and purchase the most annoying tracts of defaulted McMansions out right. Then have the Corps of Engineers run a fleet of bulldozers over them, sprinkle some top soil on top — and call it the Obama National Park system.
*** Could anyone be taking him seriously?
Obama has been dangling discretionary spending cuts as a symbol of how opposed he is to the unchecked growth of U.S. debt. The line items he’s talking about don’t amount to a hill of beans when compared to his overall largesse.
But still, silver and precious metals keep ticking down.
I’ll stick with my favorite short-term silver play, Canadian miner Liberty Mines Inc. (TSE:LBE).
When exactly is this going to happen?
I say look for the Q4/FY2009 earnings to come out.
Read more about this in my blog right here!
Article first published on Today’s Financial News
Beazer Homes USA, Inc. (BZH) and Hovnanian Enterprises, Inc. (HOV) up despite horrid housing news
By support@todaysfinancialnews.com (TodaysFinancialNews.com LLC)
