Housing starts fell nearly 7% in March, a sharper-than-expected drop as economists had anticipated a 3% decline in the wake of a 5% increase the month before, the Commerce Department reported April 18.
This could signal bad news for the economy as housing starts is considered an indicator of economic strength, but the news wasn’t entirely bad from coast to coast. Only the Midwest experienced a severe decline of 35%, largely due to winter weather. The South also had its share of bad weather in the early months of the year, but housing starts in that part of the country were up more than 3%.
Single-family housing starts were flat in the Northeast and down 5.5% in the West.
The report also includes building permits, which went up by 3.6% in March after falling 6% in February. In the case of apartment buildings, each unit counts as a single housing start so if an apartment building contains 25 apartments, that counts as 25 separate starts.
The latest numbers appear to be a continuation of a pattern that has been observed since October of 2016. The housing market is in growth territory and has been on a roller-coaster ride for the last six months with a decline in one month followed by an increase the next. Although the decline in March was more severe than expected, it wasn’t as drastic as the drops between August and September or October and November.
Construction-related stocks may struggle in this up-and-down environment, but some seem to be doing well.
North Carolina-based Lowe’s Companies (LOW, Financial) is selling for nearly its highest price in the last six months, only 9 cents below its high-water mark of March 17.
The home improvement and appliance retail chain has a price-earnings (P/E) ratio of 24.15, and its return on equity (ROE) and return on assets (ROA) are higher than more than 80% of the companies in the Global Home Improvement Stores industry.
Michigan-based Masco Corp. (MAS, Financial), a provider of products for the home improvement and new home construction markets, is also near its highest price in the last six months,
Its ROA is higher than 79% of the companies in the Global Building Materials industry. Its P/E ratio is 23.37.
Gibraltar Industries (ROCK, Financial), a Hamburg, New York-based supplier of industrial and building products, has been selling for nearly its lowest price since October.
Gibraltar has a P/E ratio of 41.86, but its ROE and ROA are lower than the majority of the companies in the Global Building Materials industry,
Houston-based Comfort Systems USA (FIX, Financial), which installs, maintains, repairs and replaces heating, ventilation and air conditioning systems, sells for more than 9% less than it did in late February.
It is outperforming more than 80% of the companies in the Global Engineering & Construction industry in ROE and ROA.
Emcor Group (EME, Financial), a Norwalk, Connecticut-based provider of mechanical and electrical construction, industrial and energy infrastructure and facilities services, sells for nearly 15% less than it did on Dec. 20, 2016, but its ROE and ROA are higher than two-thirds of the companies in the Global Engineering and Construction industry.
Meanwhile, in figures that were released April 21, existing home sales went up 4.4% in March, a 10-year high, exceeding expectations of a 2.5% increase.
Disclosure: I do not own any stocks mentioned in this article.
Start a free seven-day trial of Premium Membership to GuruFocus.
