Housing Starts Up – Time to Invest in Homebuilders?

The stock market surged in recent days with the surprising announcement that February housing starts were up 22% from January. The news has spurred some analysts to predict that we have finally landed at the bottom of the crippling housing slump with the euphoria of recovery soon to follow. Other experts insist that this outlook is overly optimistic and that the housing slump still has further to fall. With this division of opinion, it can be difficult for investors to determine whether or not now is the right time to invest in homebuilders.

The good news that housing starts rose by such a large number is difficult to argue against. If nothing else, the news seems to have lifted people’s spirits and encouraged activity in the markets. However, questions remain. Is this, in fact, a sign that new home construction is on the rebound? Are the government’s steps to sure up the financial system and encourage mortgage financing beginning to bear fruit?

Some experts claim the spike in housing starts is merely a result of a rough winter. As this theory goes, an especially cold and wet December and January in much of the country delayed what buildings were to be started until February which saw abnormally favorable weather. This theory is bolstered by the fact that the areas hardest hit by the winter, the Northeast and the Midwest, saw the largest percentage increases, 89% and 59% respectively.

In addition, home building permit statistics were far less rosy in that they rose only 3% from January. This is important because many analysts consider building permits to be a more reliable indicator of the future than housing starts. Again, the largest increases were in the Northeast and Midwest, giving still further support to the weather theory.

Free stock option newsletter » return goal > 2% / month » works in any market

Meanwhile, the ever-important West region continued to show depressing results, where both housing starts and permits declined (by 25% and 14%, respectively).

However, given the economic turmoil homebuilders have endured, many of these companies are now trading at or near historic lows. Whether or not these equities will continue to fall lower, or if the recent rebound is indicative of an awakening in this sector, is a question only history will be able to answer. Analysts caution that for investors determined to wait until the housing market has definitely hit the bottom of the trough, they may be better off keeping their money out of this volatile equity market until the housing outlook strengthens further.

If an individual has the money, though, and perhaps more importantly, the patience to wait out the possibility of some additional value fluctuations in the months ahead, many of those same experts agree that there are bargains to be found amongst the homebuilder stocks. Investors, of course, will want to do their due diligence to ensure that any company they are considering is strong enough to withstand the current economic slump should it continue to drag on further. But, while there is certainly risk associated with investing in this sector at this time, bargain hunters may turn out to be jumping in at just the right time.

Investors desiring to jump into homebuilders, but still unsure if the bottom has really been reached might consider insuring their stock investing positions with stock options. A put option can be considered the same as “stock insurance“. A put option can prevent an investor from sustaining a large loss in the event a stock investing position drops significantly.

For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions’ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.

PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the covered call investment strategy.

PowerOptions’ sister company PowerOptionsApplied provides expert stock option trading recommendations. PowerOptionsApplied specializes in covered calls, naked puts and iron condor stock options strategy recommendations. PowerOptionsApplied provides a 30-day risk free trial of its service.

[tags] stock market, housing starts, building permit, housing market [/tags]