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It's interesting to note just how well the homebuilders have been doing of late.
Most assuredly, the drop in long-term Treasury rates and, by extension, mortgage rates has helped re-build these broken homes.
But there is also talk that family formation is beginning to accelerate again, after the Great Recession kept Millennials out of the marriage market owing to poor economic prospects.
If household formations really pick-up, as appears the case, that could cause homebuilders to break ground on more new homes and would justify the rebound in homebuilding stocks like Lennar Corporation LEN, Toll Brothers Inc TOL and D.R. Horton, Inc. DHI.
One cautionary item to watch, though, is lumber.
At just under $320 per thousand board feet (the unit of measurement in a lumber futures contracts), it is well below its most recent high of $375. It’s a bit of a “non-confirmation” with regard to homebuilding stocks.
But, mortgage rates are cheap, housing affordability remains enticing, and job growth is accelerating.
Now the markets just need Millennials to create another baby boom and they may raise the roof on housing stocks.
Image credit: Roger Kidd, Wikimedia
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