MGIC Investment Corp. Chief Executive Officer Curt Culver said the recovering U.S. housing market is approaching a state of “nirvana” that will benefit his mortgage insurer.
“We’ve got a lot of kids living with their parents, frankly, because they can’t get jobs, and so as employment increases, I think you’ll see a dramatic increase in household formations,” Culver said today at a conference held by Goldman Sachs Group Inc. “First-time home buyers are what we do.”
MGIC has tripled this year in New York trading as home prices jumped and the company raised funds to rebuild capital drained by losses in the housing market crash. As the economy improves, more people will probably purchase homes, fueling further gains for the Milwaukee-based company, he said.
“We’re in for a housing nirvana in the next number of years as the economy recovers,” Culver said. “That’s the key.”
Home prices in 20 U.S. cities rose 13.3 percent in the 12 months through September, the most since 2006, according to the S&P/Case-Shiller index. The U.S. unemployment rate fell to 7 percent in November, the lowest level in five years.
Consumers have been cleaning up their balance sheets for more than four years with the help of gains in employment, stock prices and home values. Net worth for households and non-profit groups rose by $1.92 trillion in the third quarter, or 2.6 percent from the previous three months, to $77.3 trillion, the Federal Reserve said Dec. 9.
Mortgage insurers such as MGIC and Philadelphia-based Radian Group Inc. cover losses for lenders when homeowners default and foreclosures fail to recoup costs. Goldman Sachs Group Inc. recommended last week that investors buy the companies’ shares.
MGIC fell 2.7 percent to $8.18 at 4:02 p.m. in New York. Radian slipped 1.8 percent and has more than doubled this year.