Published On: Thu, Mar 5th, 2015

Lennar CEO Stuart Miller Predicts Robust Housing Market

Housing bulls and bears agree that dearth of production is an issue

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Lennar CEO Stuart Miller told CNBC that housing is looking up but there is a “long runway” ahead.

“Housing market continues to improve at a slow and steady pace, ” Miller told CNBC. One issue has been a production deficit, and “it is going to have to be made up.” Concerning the Federal Reserve hiking interest rates, Miller said the move could lead to a pullback in stocks as a “knee jerk reaction.” However, an interest rate increase reflects strength in employment and wages, and this usually leads to an increase in home buying.

Housing sales have been slow in the Northeast because of the weather, but Miller thinks the arrival of spring should increase home buying in the region. The dramatic fall in oil prices has not led to a slowdown in the purchase of homes in heavy oil producing states, like Texas. “I think we are going to see a pretty robust housing market, ” Miller concluded.

However, David Blitzer, Managing Director and Chairman of the index committee at S&P Dow Jones Indices thinks housing in the U.S. is faltering. Housing prices increased twice the rate of inflation in 2014, up 4.5% over a year earlier, but David Blitzer doesn’t think this is an indication of strength in the housing sector, and told the BBC, “The housing recovery is faltering. While prices and sales of existing homes are close to normal, construction and new home sales remain weak.

Before the current business cycle, any time housing starts were at their current level of about a million, the economy was in a recession. The softness in housing is despite favourable conditions elsewhere in the economy: strong job growth, a declining unemployment rate, continued low interest rates and positive consumer confidence.”

Homebuilder Toll Brothers, on the other hand, reported a strong quarter recently with a 78% rise in net income and an 18.7% rise in the construction of homes.

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