Business & Finance
Business and Finance
Business and Finance
Wed, July 28, 2010
Tue, July 27, 2010 Plum Creek Timber, Masco, USG, Berkshire Hathaway and Beazer Homes
CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: Plum Creek Timber (NYSE: [ PCL ]), Masco (NYSE: [ MAS ]), USG (NYSE: [ USG ]), Berkshire Hathaway (NYSE: [ BRK.B ]) and Beazer Homes (NYSE: [ BZH ]).
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Here are highlights from Mondaya™s Analyst Blog:
New Home Sales Up in June
New Home Sales rose 23.6% in June from May to a seasonally adjusted annual rate of 330,000. However, the May total was revised down sharply from a rate of 300,000 to 267,000. Thus, relative to where we thought we were, the increase was more like 10%.
Relative to a year ago, sales were down 16.7% from last yeara™s rate of 396,000. On a not-seasonally-adjusted basis, sales were just 30,000 for the month -- the weakest June on record.
Each new home built generates a huge amount of economic activity, and if new homes are not being sold, builders will not build since the cost of holding the inventory is very high. New home sales are thus much more important than existing home sales in terms of the health of the economy. Building new homes generates a lot of employment, and generally they are good-paying jobs for those without a lot of formal education.
The construction industry has been particularly hard-hit in this downturn, accounting for more than one in four jobs lost, even though at the start of the recession, it accounted for less than 6% of all the jobs in the country. Of course, high levels of unemployment is one of the reasons that demand for housing is so low. If you dona™t have a job, or fear that you will lose your job in the near future, you dona™t go out and buy a new home. High unemployment keeps the rate of household formation down. In other words, if Junior can't get a job after he graduates, he stays living in Mom and Dada™s home.
However, the economic effects of new home construction and sales go far beyond just jobs for carpenters and electricians. New home sales generate demand for lumber, thus helping out firms like Plum Creek Timber (NYSE: [ PCL ]). Makers of plumbing fixtures like Masco (NYSE: [ MAS ]) are also very dependent on new home construction, as is wallboard maker USG (NYSE: [ USG ]).
Even Berkshire Hathaway (NYSE: [ BRK.B ]) is affected by the level of housing construction activity. Thus it is not just the homebuilders like Beazer Homes (NYSE: [ BZH ]) that new home sales are important to, but the effects reach far and wide through the economy.
The one in four jobs lost only counts the direct construction workers, not the lumberjacks who have been laid off, or the workers at the plants that make building materials. Then consider that if the construction workers had jobs, they would be much more likely to take their families out to eat, thus stimulating employment of busboys, waiters and cooks. Oh, and construction jobs cannot be easily shipped to China or India.
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