The foreclosure process is long and arduous for the homeowner and markets alike. Because this process takes so long to be carried out, there can be a lag in housing markets stabilizing.
The May foreclosure report claimed that foreclosure filings (default notices, scheduled auctions, and bank repossessions) increased 9% from April. This may seem alarming but the news is debatably positive.
Here’s why: The filings should have happened a long time ago. Because it takes so long to process the claims, along with all the legal proceedings, these houses probably should have been foreclosed on over a year ago in many cases. Having houses being foreclosed on brings down the value of other homes in the neighborhood. Getting these foreclosures over with is a step towards stabilizing the prices of the housing market.
On a Negative Note
The number of new filings increased 16% in comparison to this time last year. More homes being foreclosed on is a poor indicator for the economy. It suggests that consumers are still incapable of paying their bills, adding to private debt.
It’s also bad for the banks, who are not receiving payments on the mortgages they were promised. They do get to sell the houses, but often times the banks sell the properties below market value to avoid a headache.
Business Section: Investment Ideas
Now that more foreclosed homes are entering the market, how will homebuilders and real estate markets react?
Looking back on foreclosure-related lists we have done before, we had put together real estate stocks with insider buying from last November. As it turns out, only one of the six stocks still exhibits insider buying (TXI) today and two of them no longer exist (AVTR, AMN). Here are the others:
Use the Turbo Chart to Compare the Performance of the First Two Companies in the List to the S&P 500:
2. Headwaters Inc. (HW, Earnings, Analysts, Financials): Provides products, technologies, and services in the building products, construction material, and energy industries primarily in the United States and Canada. Market cap at $255.36M, most recent closing price at $4.18.
3. Texas Industries Inc. (TXI, Earnings, Analysts, Financials): Engages in the production and supply of heavy construction materials in the United States. Market cap at $915.51M, most recent closing price at $32.72.
5. Campus Crest Communities, Inc. (CCG, Earnings, Analysts, Financials): Focuses on building, owning, and managing student housing properties in the United States. Market cap at $340.95M, most recent closing price at $10.97.
(Written by Ryan Horch)
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Analyze These Ideas: Getting Started
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Dig Deeper: Access Company Snapshots, Charts, Filings
- Griffon Corporation (GFF, Chart, Download SEC Filings)
- Headwaters Inc. (HW, Chart, Download SEC Filings)
- Texas Industries Inc. (TXI, Chart, Download SEC Filings)
- PennyMac Mortgage Investment Trust (PMT, Chart, Download SEC Filings)
- Campus Crest Communities, Inc. (CCG, Chart, Download SEC Filings)
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