McLean, VA (written by Matt Krantz/USA Today) -- How can investors benefit if the housing market is truly recovering?
After years of destruction, the housing market appears to be turning around. Home builders started constructing new single-family homes in August at the fastest annual pace, 535,000, since April 2010.
Buyers of homes continue to take advantage of a sweet combination: low mortgage rates and still beat-up home prices.
Shares of home builders have been among the clearest beneficiaries from rising hopes for the real estate market.
Some of the gains by home builders have been noteworthy. Shares of PulteGroup (PHM), the biggest home builder in terms of revenue, are up nearly 170% this year. Lennar (LEN) has nearly doubled.
And it's not just the stocks that are rising on speculation. The home builders' fundamentals are also improving.
Lennar in late September reported a 263% jump in earnings during the third quarter, blowing away analysts' estimates.
Investors need to tread carefully, though, since the housing recovery is nascent and could be quickly doused. An uptick in mortgage rates could be a big problem.
That's partly why half the 14 analysts covering PulteGroup rate the stock a hold.
Investors looking to participate in a housing recovery, and hedge a bit, might consider the SPDR S&P Homebuilders exchange traded fund, which owns appliance makers and lumber sellers, too.