The residential real estate
sector has done well this year
, which seems to indicate a recovery.
Check out the chronological graphic below for a two-year look at three stocks
on our watchlist: Lennar (NYSE: LEN)
, Toll Brothers (NYSE: TOL)
and KB Homes (NYSE: KBH)
But some stealthy issues remain that can drive the housing market right back to ground zero.
levels are not quite what they appear to be. It's no secret that there is a decline in inventory as well as an increase in the sales
of homes. But where precisely are these sales and declines coming from? When the housing bubble burst, a huge backlog
of foreclosed or bank-owned homes appeared. Over the past few years, banks have purposely taken measures not to flood the market
with excess supply for many reasons: It would mess up their balance sheets; and they want to avoid ongoing litigation with the government and severely depressing prices. Right now, the inventory levels have been "controlled."
Of the 52 million homes that have a mortgage
, more than 10 million are currently under water. Four million homes are delinquent (with mortgages going unpaid), and another 2 million have entered the foreclosure
These 6 million homes will be entering the third stage, bank-owned, and hitting the market like a neverending tidal wave over the coming years.
to consider is that an unexpected tax hike could swamp the residential housing sector. Ramifications of the so-called fiscal cliff are not often related to the housing sector in the press. But the fact is, if Congress does not reach some sort of compromise, homeowners who are delinquent and perhaps even in foreclosure will
have to pay taxes
on short sales. Taxes will
be calculated on the difference between what the house is sold short for and the value of the actual mortgage.
levels don't really bode well for the housing sector. Individuals who become unemployed, remain unemployed or are in fear of losing their jobs will not be buying a home soon. With 22 million Americans currently out of work, the unemployment rate
remains much too high to sustain a meaningful housing recovery.
So why are we watching these three -- LEN, TOL and KBH -- in particular?
These stocks have seen tremendous gains
in the past 18 months. The builders are among the largest, and the bigger they are, the harder they just might fall.
Anthony Walters is a reporter for Kapitall.com.
This article originally appeared at Kapitall.com:
Housing Stocks May Have a Storm Approaching