April 15 (Bloomberg) -- U.S. homebuilder bonds have recovered to levels last seen before the global credit freeze as investors gain confidence the economic recovery is strong enough to prevent defaults.
Yields fell to within 6.06 percentage points of Treasuries, the narrowest since August 2007, according to Bank of America Merrill Lynch’s U.S. High-Yield, Homebuilders/Real Estate Index. Hovnanian Enterprises Inc.’s debt has surged 11 percent since New Jersey’s largest homebuilder posted its first profit in more than three years on March 2.
“There is no question that the worst is over for homebuilders,” said Christopher Towle, who helps oversee $47 billion in fixed-income assets, including Hovnanian debt, as a partner at Lord Abbett & Co. in Jersey City, New Jersey. “The numbers show it.”
Investors are growing more bullish as the economy recovers from the worst recession since the 1930s, unemployment falls from a 17-year high and the Federal Reserve supports the housing market with record-low interest rates. Calabasas, California- based Ryland Group Inc., the homebuilder that targets first-time buyers, will sell bonds as soon as today, a person familiar with the deal said.
Home affordability for families with a median income rose in the fourth quarter to about the highest level since records began in 1986, according to National Association of Realtors data compiled by Bloomberg.
“It is hard to view this as anything but bullish,” Citigroup Inc. analysts led by Tom Fitzpatrick in New York said in an April 13 report. “There are good reasons to suspect some ‘brighter days’ are around the corner.”
Reported by Bloomberg BusinessWeek (04/15/2010)
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