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Housing data has been a mixed bag this year, but it's beginning to look as if the sector really is see-sawing its way back to vitality. Although housing starts declined a bit from April to May, building permits filed last month were up nearly 8% from April -- and a healthy 25% year over year. Builders' confidence surged, too, and the National Association of Home Builders came out with a prediction that single-family homes will enjoy a 19% boost over last year's lackluster performance.
Companies that supply the industry are on the upswing
Building-materials suppliers such as USG (NYSE: USG ) and Masco (NYSE: MAS ) have seen business boom in 2012 after last year's sluggish business environment. USG has seen its stock price soar 60% this year, as it turns in better-than-expected numbers on revenue. The company also raised its wallboard prices by 35% earlier in the year, a boost that hasn't hurt sales a bit and is padding the bottom line. Masco has seen its fortunes rise recently, too, as increases in house construction and home remodeling raise orders for materials such as plumbing supplies and cabinetry.
Standard Pacific (NYSE: SPF ) has been on a real tear this year, having rebooted its business after nearly going under four years ago. The company is rebounding nicely, with hefty year-over-year revenue increases and with its current backlog, new orders, and completed sales all rising from the same time last year. Analysts note that the company stepped up land purchases during the downturn, which should put it in good stead for future growth.
Meanwhile, big-box retailers cater to the home-improvement crowd
Your friendly neighborhood Home Depot (NYSE: HD ) and Lowe's (NYSE: LOW ) have been doing quite well in the home-renovation market, and both have been improving customer service by outfitting their employees with mobile devices to better serve customers. Lowe's has seen improvement this year over last, but it still lags behind Home Depot -- particularly in same-store sales growth. Home Depot recently affirmed its 2012 guidance, while Lowes recently cut its outlook.
The housing market still has headwinds to battle, such as a stuck-in-gear economy and a dull employment picture. Add to that the fact that the percentage of sales that have closed are lower now than they were a year ago, thanks to the difficulty many borrowers face obtaining mortgages these days. The good news can't be denied, though, and the overall trend is upward, albeit at a snail's pace.
Home Depot's and Lowe's gains over the past year may indeed be due more to the home-renovation market rather than to new construction -- so keep an eye on these two, since they stand to move even higher once the housing market really heats up. Lowe's could be due for a real turnaround, as it takes steps to undo the mistakes it made right before the housing downturn by closing non-productive stores.
Standard Pacific, with its huge P/E ratio, seems to have earned the faith of investors over the past year that it will soon move into profitable territory with its new business plan and rising year-over-year revenues. With only one stellar year under its belt, though, the company's stock price seems a bit expensive right now, even with the promise of additional revenue from the increase in new orders and backlog. This company could be one of the true sleepers of the housing recovery, however, so keep it in your sights.
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