Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



A Word of Warning About the Housing Recovery

"New-home sales surged last month, a sign the housing market is regaining momentum after a rise in mortgage rates last summer," read the first sentence of story in The Wall Street Journal this morning.

And indeed it appears to be. According to the Commerce Department, sales of new single-family houses rose in October by 25.4% above the revised September rate. It was the largest sequential increase in new home sales in over a decade.

Looks like it's time to buy shares of homebuilders like D.R. Horton (NYSE: DHI  ) and PulteGroup (NYSE: PHM  ) , the nation's largest builders by volume.

Or maybe not. It turns out these results were an anomaly.

In the first case, they came on the heels of an otherwise dismal performance during the prime home-selling season. From July through September, new home sales fell into a deep trough. Had they stayed even with June's figure, October's results would have ended up being down on a sequential basis.

On top of this, both existing and pending home sales are in the midst of a multi-month downturn. The latter have decreased on a monthly basis since May, while sales of previously occupied dwellings have dropped for three months in a row.

The takeaway here is that the housing recovery remains extremely fragile.

Should investors welcome October's new home sales figures? Absolutely. But it's critical to keep the reading in perspective before you rush out to load up on shares of D.R. Horton, PulteGroup, or any other homebuilder you believe will imminently benefit from these trends.

Three stocks to own forever
As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love. 

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2752113, ~/Articles/ArticleHandler.aspx, 9/27/2016 4:52:09 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,228.30 133.47 0.74%
S&P 500 2,159.93 13.83 0.64%
NASD 5,305.71 48.22 0.92%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/27/2016 4:02 PM
DHI $30.02 Up +0.10 +0.33%
D.R. Horton CAPS Rating: ***
PHM $19.89 Up +0.12 +0.61%
PulteGroup CAPS Rating: ***