LOS ANGELES (AP) -- Two analysts say they anticipate the housing market recovery continuing this year, helping lift business for U.S. homebuilders.
Driving housing over the next few years will be moderate job growth, a low inventory of homes for sale, foreclosures becoming less attractive and Federal Reserve policies that support assets like real estate, said KeyBanc Capital Markets analyst Kenneth Zener in a client note Wednesday.
He also expects that builders will break ground on 1.1 million to 1.5 million new homes by 2015. That would be an annual rate for housing starts that's in line with a healthy market.
In November, housing starts hit a seasonally adjusted annual rate of 861,000. And economists are expecting the Commerce Department to report on Thursday that housing starts rose in December.
Stable job gains, record-low mortgage rates and a tight supply of new and previously occupied homes available for sale have helped fuel home sales and drive prices higher, albeit from very low levels.
On Wednesday, the latest National Association of Home Builders/Wells Fargo builder sentiment index showed that confidence among U.S. homebuilders held steady in January at the highest level since April 2006, just before the housing bust.
Builders' confidence reflects overall improved sales over the past year, propelling many of the major builders' earnings higher. And, in turn, given their shares a lift.
Zener's top homebuilder stock picks are Lennar Corp. and Toll Brothers Inc.
The analyst likes that Toll Brothers is the nation's largest builder of luxury homes, has a strong presence in the Northeast and a large bank of land.
Lennar, which reported on Tuesday that its net income more than quadrupled in the September-November quarter, has been aggressive and profitable in rebuilding its land holdings, Zener noted.
Stifel Nicolaus analyst Michael Widner also thinks that Lennar is well-positioned to gain market share as the housing recovers.
But he sounded a note of caution for the stocks in a separate note Wednesday. Homebuilders' shares are "fairly rich," he said, and already reflect "a fairly optimistic scenario" for a housing recovery.
An index that tracks homebuilders has risen 51 percent over the past 12 months.
Meanwhile, Lennar shares slipped 12 cents to $40.56 in afternoon trading Wednesday. Shares in Toll Brothers fell 43 cents to $34.96.