Profit on Home Retailers

NEW YORK (TheStreet) — For investors looking to profit from the rebounding U.S. housing market, stocks in the repair and rebuilding sector such as Home Depot (HD) and Lowe’s (LOW) should do better than DR Horton (DHI), Beazer Homes (BZH), and other home builders.

At present, home sales are starting to cool down, according to the National Association of Realtors. But the Remodeling Futures Program at the Joint Center for Housing Studies at Harvard University predicts that remodeling work will increase at a double digit rate for early 2014.

December home sales were the second weakest month for 2013.

Last year, real estate buying was at its highest level since 2006. But investors should not expect that to continue. Joel Narooff, Chief Economist for National Economic Advisors, warned that the pace was simply “not sustainable” due to “mortgage rates likely to move up this year, sales and price gains will likely be half of what we saw last year.” Moreover, November’s rate was adjusted, so the December sales report was not that bullish.

Even if mortgage rates go up, that will not curtail remodeling work.

It should increase it, actually. Due to higher mortgage rates, fewer people will be able to afford to move or buy more expensive homes. The higher the interest rate on the loan, the higher the payment for the home buyer. That will reduce the ability of many to purchase another house. Ā 

As a result, more potential buyers will direct their efforts to remodeling work on their existing home.