Homebuilder and Financial Stocks Rose Despite Foreclosures
May 20th, 2009 by 
Joseph Smith
Stocks of homebuilders gained today despite setbacks arising from continued forclosures in many areas of the country.
Home building firms were among the biggest gainers in trading as Pulte Homes increased by 7 percent to reach $10.30 at closing, Lennar climbed by 13.7 percent to reach $10.02 and Toll Brothers rose by 5.8 percent to reach $19.65 at closing.
The increases reflected the rise in homebuilder confidence despite being battered by bargain prices of foreclosures.
Even North Carolina-based home improvement retail company Lowe’s increased its shares by 8.1 percent to reach $19.94 at closing. Investors were encouraged by Lowe’s first quarter gains that surpassed expectations. Lowe’s revised upward its sales and revenue forecasts for 2009 as its units experienced increasing demand for materials for repairs and maintenance of gardens and lawns.
Lowe’s gain indicates a rising number of residential properties that need to be improved and repaired and a rising number of foreclosures purchased and fixed.
Economists and housing analysts are hoping that the report on total housing starts for April, to be released this week, has improved.
The homebuilder confidence index, as reported by the National Association of Home Builders, has been the highest point since September. The drastic decline in home prices, especially foreclosures, has been one of the key factors for the economic downturn, causing losses in home building companies and mortgage banks and cutting down personal income.
If foreclosures are controlled and home prices bottom out and become stable, supply and demand in the housing market could level off and start a recovery in the housing industry.
Financial stocks also improved, mainly because of the upgrades of financials by BMO Capital Markets, including positive comments by Rochdale Securities financial analyst Dick Bove. Bove explained that banks will perform strongly in the stock markets and will grow explosively as the national economy improves.
Goldman Sachs increased by 6.5 percent to reach $143.15 at closing, Bank of America increased by 9.9 percent to reach $11.73, Morgan Stanley rose by 8.2 percent to reach $28.28, Wells Fargo climbed by 8.3 percent to reach $26.93 and Citigroup jumped 4.6 percent to reach $3.64 at closing. BMO Capital Markets reiterated that banks’ stocks will gain from improved bank profits in the next quarters.
All in all, stocks returned to their upward direction because of renewed optimism that the effects of foreclosures are ending and that the nationwide economy is nearing the start of its recovery.
