Volatile U.S. housing market pushes through the recession with thin confidence

Glass half full or half empty for housing?

When the federal home buyer tax credit expired on April 30, 2010, it was to be expected that new home sales would inevitably drop and home construction would slow down. As the impact of the expired credit trickled through the market, the effects were varied: consumer confidence has been down all summer and homebuilder shares have been so volatile that one company’s profits determine price per share across the industry; yet there are signs of optimism, albeit cautious, about American home sales in the second half of the year. So where might the U.S. housing market really go from here?

Over the past couple of  months, mortgage rates have dropped to historic lows, meaning we should see an increase – or at least a

Sector's only hope?

So how can we explain the recent upward momentum of the top ten homebuilders? When one of the top ten have a good quarter, the sector performs decently (see our table of the top ten homebuilders’ price changes below), although the sector has demonstrated much more volatility than the overall market, as measured by the S&P 500. With the housing market, it might 
be necessary to bank on optimism: the very impossibility of deciphering the trend is a challenge 
for investors looking to predict how home sales will fare in the second half of 2010.   

Click images on the right to enlarge. 

Price performance of top 10 homebuilders

To view our charts and trends articles created with FactSet Economics over the past months, please read recent articles on debt in Greece and U.S. vacation plans.