D.R. Horton, Inc. (DHI), Lennar Corporation (LEN) and One Important Question: Is It Time to Get out of the Housing Market?

Home builders have also been offering mortgages to their clients. And they have shown growth in their financial services revenues. Lennar Corporation (NYSE:LEN)’s revenue from financial services grew by more than 40% in the first quarter of 2013 compared to the same quarter in 2012. Alas, this segment accounts for less than 10% of the company’s total revenue.

D.R. Horton, Inc. (NYSE:DHI) has a smaller financial-services segment that reached in the last quarter of 2012 nearly $42 million – an increase of nearly 100% compared to the same quarter a year earlier.

But the rise in home-builders’ revenues in both housing and financial services might reach a halt or at least start to slow down, if and when the Fed will stop or ease its current expanding monetary policy.

Fed policy

The Fed’s quantitative easing might end in 2013. The upcoming FOMC meeting (at the end of April) might shed some light on this issue. If the Fed will pull back from its current policy, we might see a slowdown in the housing market. I don’t think the Fed will be that careless and end its current asset-purchase program without replacing it with a different policy, or at least ease into this exit strategy.

Moreover, the implementation of the sequester was most likely a preview for the future policy of government to lower U.S debt by executing spending cuts and tax increases that might lower the demand for housing and slowdown the economy.

Even the recent hype over University of Massachusetts economists, who refuted the study done by Reinhart-Rogoff (by showing that austerity measures aren’t necessarily needed to rally a high debt economy), won’t help shift U.S policymakers from cutting the U.S budget deficit. Therefore, we might see a slowdown in the housing market as the year progresses that will reflect in the profits and revenue growth of home builders and banks.

The bottom line

I don’t think there is a clear answer as to when or if the housing market will change course. But I do think the Fed is one of the reasons for the recent recovery of the housing market. Once the Fed changes its policy, we might see a shift housing that will adversely affect leading home builders.

The article Is It Time to Get out of the Housing Market? originally appeared on Fool.com.

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