Homebuilding, building materials and forest products industries are key indicators of a recovery or upswing in the economy, according to Bilal Said, vice president and senior equity analyst for Pioneer Management Corp., Boston.
Said said stocks of companies in the homebuilding, building materials and forest products industries anticipate the recovery faster than other indicators, so people delving into that type of investment need to be ready to purchase.Speaking to the Utah Chapter of the International Association for Financial Planning in the Hilton Hotel, Said used a chart to show how forest product-related stocks should be purchased.
Usually occurring in five-year cycles, the forest product-related stocks reach a peak in 12 to 18 months and then decline in value for six to nine months. When housing starts increase, the value of the stock increases for nine to 12 months and there is a 12- to 18-month period of rising stock value. Then the cycle starts over again, Said said.
In explaining that homebuilding, building materials and forest products stocks are important as the nation comes out of recession, Said said lowered interest rates are only one factor in stimulation of homebuilding and home purchasing.
Other factors are affordability, consumer confidence in the economy, pent-up demand for housing, consumer income and debt levels, the state of the economy, expectations, demographics and government policy.
In the early 1980s when interest rates were high, it took 50 percent of a family's disposable income to purchase a house, but in the past few years that has decreased to 30 percent, Said said.