Wednesday, March 26, 2014

The U.S. housing sector

The real estate sector in the U.S. has been in the spotlight in recent years , first by the mortgage crisis and then by the support of the interventionist policies of the Federal Reserve , via bond purchases, which have led to artificially low rates .

This sector is particularly cyclical, having shock and similar to the evolution of the economy recessionary times. Although, if we briefly jump back in time, we see thanks to low interest rates in mid-2000 began a large residential boom, even in times when the economy went through the best of times , until the outbreak the mortgage crisis and the housing bubble burst .

This industry is divided into residential and commercial services, although some companies involved in both. Both the residential and commercial industry are highly fragmented . In fact, the 50 largest companies in residential buildings make up less than 30% of total industry revenue . Since the collapse of the housing bubble in the U.S. and a high unemployment rate under natural unemployment in the economy, the residential industry suffers the consequences of the past. The commercial segment of the industry was a little better than the residential market since the recession .

There has been talk of recovery in the sector given the rise in housing prices in the U.S. example is the evolution of the SP / Case- Shiller U.S. National Home Price Index rate since mid-2012, although it should be noted that continue a series of conditions negative as :

- The delinquency rate on single-family residential mortgages in the United States remains surprisingly high , ranking second quarter of this year at 9.41% .

- Lowering of consumer confidence indicators . The consumer sentiment from the University of Michigan has dropped to a level not seen since December 2011. (down to 72 in November from 73.2 in October)

- It has not been a widespread buying first homes , but the main buyers were institutional , representing one third of existing sales.

- The next reduction of stimulus by the Federal Reserve will raise rates as mortgages and are already pricing in the currency market will produce the appreciation of the dollar against its major crosses.

After these brief remarks about the conditions of the U.S. real estate industry , we have to analyze the companies that form part of the model EAFI Aspain 11 Financial Advisors portfolio for the Real Estate sector after scoring make America the Stoxx 600 .

Weyerhaeuser Co: is mainly engaged in lumbering and the manufacture , distribution and sale of forest products, real estate development and construction. Therefore, to be a wood products company is a convenient analyze data annually instead of quarterly as they have seasonal component. In October, the company announced third-quarter results exceeding expectations . Thus, sales increased 24 % , the profit up 105.62 % , EBITDA by 62 % and revenues by 99 % during the first 9 months of 2013 year on year .

AvalonBay Communities Inc. : dedicated operating apartment communities institutional quality in markets with high barriers to entry in the U.S.. AvalonBay Communities Inc. in October announced a net attributable loss for the third quarter of $ 10,715,000 . This represents a loss per share of 0.08 . The graph of the evolution of the portfolio we can see great value cut from the presentation of these results.

Riocan Real Estate Investment Trust : is a Canadian trust with a total capitalization of about 13.6 billion at September 30, 2013 . It owns and manages Canada's largest portfolio of shopping centers with ownership interests in a portfolio of 346 commercial properties corresponding to more than 83 million square meters, having properties in the U.S.. In mid-November Riocan announced the distribution of 11.75 cents per share for the month of November. The distribution will be payable on December 6, 2013 to unitholders of the trust .

Public Storage : a background composed and self-managed real estate investment that buys , develops, owns and operates mainly storage areas. In the results presented in November announced that they have increased revenues by 5.5% yoy to 441 million during the third quarter, while operating profit rose 7.2% to 316 million .

SL Green Realty Corp: On October 29 announced a public offering of secured 2,600,000 shares of its common stock , par value 0.01 per share. With this, the company intends to use the proceeds derived therefrom for general corporate purposes , including new investments and payment of outstanding debts.

In conclusion , the sector is subject to the evolution of the U.S. economy, where major constraints come from the hand of macroeconomic variables such as GDP, interest rates , unemployment and infrastructure spending by the State . Undoubtedly, more short-term major determinants or conditions come from the Federal Reserve, because if in the coming months adopts the decision on withdrawal of stimuli involved for the housing sector to the start of the rates artificially low mortgage .

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