Wells Fargo & Co (WFC), Bank of America Corp (BAC): Housing’s Mixed Signals

The health of the housing sector is undoubtedly one of the most important drivers of the economy. And this is particularly true right now, as the nation continues to recover from the housing-induced financial crisis.

This morning, the Commerce Department released its first of three major reports on the housing market for the month of July. This release, covering various phases of the construction process, showed that the overall picture improved last month, though all of the growth came in the multi-family market — that is, structures containing more than a single unit.

All three of the metrics covered in the report experienced growth last month. Building permits increased by 2.7% over June to come in at 943,000, or 12.4% higher than the same month last year. Housing starts were up sequentially by 14.5% to 896,000, or 12.9% higher relative to July 2012. And housing completions improved compared to June by 12.9% to 774,000, equating to a 17.9% uptick on a year-over-year basis.

anImage

While this is unquestionably good news, as you can see in the chart above, the one downside was the performance of the single-family housing market, which saw both permits and housing starts fall compared to the previous month. As The Wall Street Journal noted, “U.S. home building rose in July on a sharp rise in apartment construction, but a pullback in construction of single-family homes underscored the risk of higher mortgage rates restraining housing demand.”

Over the last few months, I’ve discussed the potential impact of fluctuating mortgage rates on the housing market on multiple occasions. Immediately following the initial spike in rates at the end of May, it looked as if the trend may paradoxically spur the housing market, as it freed up the mortgage pipelines at major lenders like Wells Fargo & Co (NYSE:WFC) and Bank of America Corp (NYSE:BAC) to focus on purchase-money mortgages.

By contrast, today’s data suggests just the opposite. As an analyst quoted by the Journal wrote in a note to clients, “Today’s report shows that the recent spike in mortgage rates is indeed slowing the housing market.”

At the end of the day, it’s still too early to conclude what the ultimate impact will be. Yet, by the looks of housing stocks today, one can’t help but wonder whether or not the latter opinion has merit. At the time of writing, shares of many of the nation’s largest homebuilders are rallying. Shares of Beazer Homes USA, Inc. (NYSE:BZH) are leading the way, up by 6%, followed by PulteGroup, Inc. (NYSE:PHM)‘s 3.8% advance, and D.R. Horton, Inc. (NYSE:DHI)‘s 2.6% move.

The article Housing’s Mixed Signals originally appeared on Fool.com and is written by John Maxfield.

John Maxfield owns shares of Bank of America. The Motley Fool recommends Bank of America and Wells Fargo. The Motley Fool owns shares of Bank of America and Wells Fargo.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!