Building value: Contrary call on homebuilders

Filed under: Newsletters, Toll Brothers (TOL), Stocks to Buy, Housing, Recession

"The economic crisis began in the housing sector and will likely end there," says Stephen Leeb. In his top-notch The Complete Investor he takes a contrary look at two homebuilders.

"Though my view may sound contrarian to a fault, a close look at the housing market, especially given recent government actions, suggests a recovery will happen sooner rather than later and be stronger rather than weaker.

"When home prices decline, buyers pull back, afraid of buying too soon. This leads to further declines and further buyer reluctance. No surprise, then, that housing starts have fallen dramatically.

"Meanwhile, consumers, who had been borrowing money based on the value of their homes, found this source of credit drying up, which dealt a further blow to the economy.

"It is a vicious circle indeed. Ultimately, though, it will almost certainly end with more willing lenders and a stronger housing market as the huge amounts of money being flooded into the system start boosting balance sheets of potential lenders.

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Building value: Contrary call on homebuilders originally appeared on BloggingStocks on Mon, 10 Nov 2008 13:18:00 EST. Please see our terms for use of feeds.

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