Tags: Home | builder | shares | soar

Home Builder Shares Soar, Despite Moderate Housing Rebound

By    |   Friday, 23 March 2012 07:04 AM

Investors are diving headfirst into home builder stocks, despite the fact that the housing market’s recovery isn’t particularly strong.

The Standard & Poor’s index of 11 home builder stocks has hit a two-year peak, soaring 80 percent since the stock market’s early October low, The New York Times reports.

This rally comes despite the fact that existing home sales slipped 0.9 percent in February from January, though February’s level still represented the second strongest in the past 21 months.

Experts recommend caution about buying home builder shares now. While the industry should continue to recover, the rebound may proceed at a glacial pace, they say.

Pent-up demand for housing continues, but it remains difficult to garner a mortgage, Diane Swonk, chief economist for Mesirow Financial, writes in a report obtained by The Times. That will limit the home market’s rebound and send more potential buyers to rentals, she says.

In addition, the low hanging fruit has been picked among housing stocks.

“If you were looking for a home run kind of move, you needed to have bought when the stocks were significantly undervalued six months ago,” Philip Orlando of Federated Investors tells The Times.

But some investors see room for further gains.

“Real estate today reminds me of Internet stocks after the dot-com bubble burst in 2001,” Ian Wyatt of Wyatt Investment Research writes on Seeking Alpha. “There are opportunities ripe for the picking for selective and patient investors.”

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Friday, 23 March 2012 07:04 AM
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