In Brief

By Eric Roston

HOME SWEET HOME

February's existing home sales--a hearty 5.18 million annualized--show an industry that, thankfully, doesn't know when to quit; odd, since housing often leads the downhill charge into recession. Construction giants such as Centex and KB Home continue to expand, thanks to consolidation, low mortgage rates and productivity gains. An order backlog means no housing glut this round: spec building has been a no-no since the S&L blowout, and many towns, already sprawling, are now persnickety about development.

The median price of a home is now $138,800, which is super if you want a median home and live in a median market. Actually, the Affordability Index for February, released last week, came in at 144, a two-year high, meaning that the average family can afford 144% of the median price. "The housing sector is the only part of this economy still standing tall," says David Lereah, chief economist at the National Association of Realtors.

With inventory a bit short and prices still creeping up, buyers may not yet be able to name their own price. But many investors are finding shelter. Several analysts have renewed recommendations of home builders' stocks, despite the cyclical history of this group of stocks.

Falling mortgage rates have also done wonders for those who sell them. Fannie Mae and Freddie Mac, the twin towers of mortgage finance, both raised their 2001 growth expectations last month. Countrywide Credit Industries, the largest independent residential mortgage firm, escaped the carnage on Wall Street, gaining 10% in March, but remaining flat for 2001.

Despite these defiant expectations, the possibility of increased unemployment could threaten the sector's healthy condition. For investors, the question is whether cheap mortgages can trump wider fears about the economy.

--By Eric Roston