Rising now..3 Dec 2013 12:46
ST has flagged the recent fall in house stocks as a buying opportunity..
extract from article:
Last week’s unexpected news that the Bank of England’s scheme to help reduce mortgage costs is to be overhauled in January has not only sparked fears that lending costs could rise for some home-owners, but has led to a sell-off in the house builders. It’s one that I fully expect to reverse once the dust has settled and investors make a rational judgement on the state of the housing market and the medium-term implications brought by a withdrawal of government subsidies, rather than the knee jerk reaction we have witnessed in the past few days. I also fully expect my first quarter housebuilder effect to take place once again and, having advised buying shares in the sector last week – most are only modestly down on the recommended buy-in prices – I would advise using the weakness as a decent buying opportunity. I have good reason to as well.
On solid foundations
As I mentioned at the start of this article, last week I advised buying shares in the housebuilders, primarily to benefit from a seasonal first quarter effect whereby in the past 34 years the sector has risen almost 90 per cent of the time and generated a double digit return in the process ('As safe as houses', 27 Nov 2013). I have little reason to think that this seasonal trend will not repeat itself since we are guaranteed further good news from the housing market, both in terms of sales for home builders, lending data for mortgage approvals and price data from organisations that track the market.
'It is also reasonable to assume that given the momentum in private residential sales and prices, earnings upgrades could be in the offing as soon as the nine FTSE 350 housebuilders start releasing their pre-close trading statements and financial results from the end of January onwards. On valuation grounds the sector is not overvalued and balance sheets and land banks are both robust. This week’s share price weakness is, in my view, a buying opportunity and one that by the end of March is likely to once again bring financial rewards.'