Zacks.com releases the latest Zacks Industry Rank. Stocks featured
in this week's analysis includes
Zacks Industry Rank Analysis is written by
Despite a bipartisan agreement in the Senate for a bill to help homeowners facing foreclosure, investors would be prudent to continue to avoid homebuilders and other companies tied to the housing industry.
Consider
Brokerage analysts quickly widened their fiscal second-quarter
loss projections. The consensus estimate now calls for a loss of
The fiscal 2008 estimate was also severely cut, falling
The resetting of adjustable rate mortgages, the weak economy and falling house prices are the most obvious reasons for the continued housing slump. There are several other reasons why the slump could last longer than currently expected:
-- Tight mortgage terms. Credit scores of 700 or higher, often
720 or higher, are being required by many lenders. At the same
time, usage of credit cards is growing and there are
legitimate fears about a rise in credit card defaults.
-- Second-loans, which allow homeowners to avoid paying PMI, have
become more difficult to get. Some lenders have stopped
offering them, while others have raised the interest rates on
these loans.
-- Banks are very slow to rid their balance sheets of short-sale
properties. It is not unusual for a period of two months or
longer to pass after a qualified buyer has extended an offer.
(A short-sale is a transaction where the offering price is
below the amount owed on the property.)
Taken together, all of these factors are resulting in higher inventory levels. Even if prices fall further, would be buyers still need the ability to obtain loans and close transactions. Considering that lending standards are tightening and FICO scores appear to be at risk of falling, there is a real possibility that buyers are going to have problems getting loans.
I would like to be optimistic, but the data strongly suggests the housing market is not going to rebound in the short-term.
TOL is a Zacks #4 Rank ("sell") stock and is classified in
Building/Residential Commercial (http://at.zacks.com/?id=4571). This
group also contains five other Zacks #4 Rank stocks, including:
LOW and HD are Zacks #3 Rank ("hold") stocks. Both are classified in Building Products-Retail/Wholesale (http://at.zacks.com/?id=4572).
The interactive Zacks Industry Rank List allows you to see all of the companies, and their Zacks Rank, within more than 200 industries. See the list at http://at.zacks.com/?id=3208.
About Zacks Industry Rank and the Zacks Rank
Zacks Industry Rank is calculated by averaging the Zacks Rank for all covered companies within a given industry. The Zacks Rank is assigned to approximately 4400 stocks and ranges from #1 ("Strong Buy") to #5 ("Strong Sell"). Both the Zacks Industry Rank and the Zacks Rank are quantitative indicators designed to cover periods of 1-3 months.
Since 1988, the Zacks Rank has proven that "Earnings estimate
revisions are the most powerful force impacting stock prices." Since
inception in 1988, #1 Rank stocks have generated an average annual
return of +32%. During the 2000-2002 bear market, Zacks #1 Rank stocks
gained +43.8%, while the
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Source: Zacks.com