Big Homebuilders Espousing Optimism. Surprised?

December 22, 2005, Wall Street Journal — Everyone has heard the housing market is showing signs of slowing. But the companies that build homes aren’t going to let popular wisdom gum up their works — or their stocks — if they can help it. New-home construction rose 5.3% in November from the previous month, the largest monthly increase in housing starts since April and far above the level economists and analysts were expecting. The pace of applications filed by builders for future construction also picked up last month.

Much of this November activity was tied to plans made months ago, and data watchers say that the housing-starts reports, which are put out by the Commerce Department, are questionable given seasonal adjustments and other assumptions that go into them. But bearish economists and market watchers still feel there are too many foundations being poured and nails being pounded. Traffic is down at new-home communities around the country. Real-estate agents are taking longer to sell homes, and homeowners in some areas have had to cut prices to trade out of their patch of the American Dream.

Meanwhile, the number of unsold new homes under construction is at an all-time high. Executives at some of the biggest publicly traded home-building companies say they’re on top of their game and are managing their projects and landholdings in a way that won’t leave them or shareholders exposed. Yet some of these same executives, including those at Toll Brothers Inc., have been net sellers of their companies’ stocks this year, even as they cite the health of their industry. The Dow Jones U.S. Home Construction stock index is up nearly 17% on the year, although many builders’ stocks are well off levels seen this summer.
A Housing Slowdown? Not for Builders [WSJ]