Housing's Bright Spot: Stocks; Despite the Sector's Spiraling Crisis, Builders' Shares Are Gaining Fast
When the stock market becomes erratic, as it has in the past year, investors tend to play it safe, fleeing to recession-proof sectors such as consumer staples and utilities. After all, who's willing to give up shampoo and electricity?</br></br>Shares of U.S. home builders rose 18.5 percent in the first quarter, according to Capital IQ, a division of Standard & Poor's. Residential REITs, essentially real estate mutual funds, were up 12 percent. Land subdividers and developers jumped 17 percent. By comparison, the S&P 500-stock index was down 9.9 percent.</br></br>So what's with the rebound in industries tied to home building, the root of the economic crisis that has spread across the globe? "It's one of those things where you can probably come up with a million theories and none would be right," said Greg Fernandez, a financial planner with Nations Capital Wealth Management in McLean.</br></br>Chris Hussey, managing director of Goldman Sachs's small- and mid-cap research group, offered one theory: "These stocks are down a lot," he said. "[Investors] say to themselves, 'What didn't work out last year? Maybe they'll do well this year.' "</br></br>Recent government intervention has buoyed hopes of a recovery for the industry. Congress passed an economic stimulus plan. The Federal Reserve slashed a key interest rate. And last week, Senate Democratic and Republican leaders agreed on a package that would provide billions of dollars in tax rebates to home builders.