A flicker of light in the U.S. housing market

The Globe and Mail

New building permits surged 5.1 per cent to a seasonally adjusted annual rate of 717,000 units last month, the highest since October, 2008, the U.S. Commerce Department said on Tuesday. (Kevin Lamarque/Reuters/Kevin Lamarque/Reuters)

Calculated Risk points out that at least one part of the U.S. housing market is showing some strength: Manufactured housing shipments in January rose to 60,000 on a seasonally adjusted annual rate, up an impressive 33 per cent over last year.

Okay, that’s a far cry from the glory days of manufactured housing – we’re talking prefabricated homes here, not mobile homes – when shipments would sometimes top 200,000 a year. And yes, it is a small part of the economy. And yes, a gain in shipments isn’t always a good reflection on the economy, given that shipments spiked in the aftermath to Hurricane Katrina, in 2005.

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Still, the gain in shipments turned our attention to companies that operate within this sector. And look at this: share prices have spiked this year. For example, Skyline Corp. (which also makes recreational vehicles) has jumped 62 per cent. Nobility Homes Inc. has risen 57 per cent.

Of course, these are bittersweet rebounds because things have been pretty rotten over the longer term. These stocks were hit hard during the housing bust, financial crisis and recession, with a number of companies seeing their stocks delisted. Cavalier Homes Inc. was snapped up in 2009 by a subsidiary of Berkshire Hathaway Inc.

As well, this year’s rebound in share prices comes from a very low base. While most stocks hit rock bottom in early 2009, manufactured housing stocks continued to slide as the broader market recovered, hitting bottom only late in 2011.

Skyline’s financial results reflect some of the wider problems here: It has reported a loss during each and every quarter since the second quarter of 2008. Quarterly revenues, once as high as 120-million (U.S.) in the second quarter of 2005, have since shrivelled to about $45-million.