Biz Brief: Stocks to Buy for a Recovering Housing Market
As long as you have a longer-term outlook. On Tuesday, Federal Reserve Governor Elizabeth Duke said that while "low mortgage rates help keep mortgage payments relatively low from an historical perspective, households remain quite burdened by debt payments." The fact that housing may be slower to rebound that initially expected is putting pressure on the stocks of companies in the housing sector.
But it's worth remembering that just last week, the National Association of Realtors said its seasonally adjusted index of sales agreements for previously owned homes rose 6% in April from a month earlier. The news marked the third consecutive month of increases and homebuilding stocks posted gains on the news.
Now, with the current fall, there could be opportunities in pure-play mortgage insurance companies such as PMI Group (PMI) and Radian (RDN). Private mortgage insurance is a key part of the residential housing market since it is considered a preferred solution for credit risk protection for mortgage loans with less than 20% down payment.
Both companies have been rebounding on the hopes of a recovering housing market and both have seen their shares fall on Tuesday in early trading. Shares of PMI Group are off more than 3% and are down by about 50% from their 52-week high. Shares of Radian are down 4% to just below $8 per share.