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Homebuilder Stocks Down From Their Highs

Posted by: Peter Coy on December 8, 2006

I have an article in the latest issue of BusinessWeek contrasting the perspectives of Wall Street and Main Street in the housing market. I say that potential homebuyers on Main Street don’t need to behave like stockpickers on Wall Street.

Homebuilding stocks have already jumped about a third since their summer low because the market tends to anticipate trends and react ahead of the facts on the ground. (So if you haven’t jumped in yet you’ve already missed a bunch of the run-up.) Housing prices, in contrast, move much more slowly. No need to rush to buy now. Besides, economists say there’s an excellent chance that prices will continue downward well into next year.

On Dec. 6, the day the magazine goes to bed, the Standard & Poor’s Supercomposite Homebuilding Index made a big move upward, making it the best-performing of 147 S&P indexes over a 30-day period. That seemed awfully rich to me, and I said so. It struck stock analyst Ivy Zelman of Credit Suisse the same way. She put out a note saying she thought the sector was overvalued, and homebuilding stocks promptly fell yesterday and today. The index now ranks fourth in 30-day performance among the 147 S&P groups.



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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