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Investment Plays For A Softer Market

Posted by: Peter Coy on March 30, 2006


BusinessWeek’s Tim Mullaney writes:
How do you invest in the softening real estate market?

I don’t know what stocks I’d buy. I wouldn’t be racing to get shares of Realogy, which is the name of the planned spinoff of Cendant’s Real Estate unit, even though it’s got a huge position in a very large industry. Where’s the growth? But I dropped ZipRealty from my BW Web 20 model portfolio in February, and passed over Web broker-referral service I kept IAC, but I’m betting on its search engine rather than its real estate or LendingTree mortgage-referral sites in the short term. Even if the real estate market does OK, I wouldn’t want to wait around for Wall Street to decide the coast is clear. People are likely to be cautious for a good while.

I’m cautiously attracted to home builders. Is that nuts? Any big builder around now went through a firestorm in the early 1990s. Balance sheets at companies like Ryland and NVR are, I’d reckon, a whole lot tighter than when I was covering those companies in Baltimore 15 years ago. (My bias: I made a tiny bit of my rep predicting in 1990 NVR would go into Chapter 11. They did. Too bad I missed the part about that stratospheric rise after the parent of Ryan Homes came out of bankruptcy, which was one of those deals where 10 or 15 grand, bet boldly when things looked like Hades, could have funded your retirement by itself). They’re all off their highs – Toll Bros. most of all – but not in any cataclysmic way. If they do get whacked, jump in then and ride them up. Whatever the builders’ problems are, they’re cyclical rather than secular. Watch this space as I do a little research, or feel free to add your own in the comments box.



BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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