Homebuilders are rallying lately. Real estate developers were some of the market's biggest gainers last week:
- D.R. Horton (NYSE: DHI ) rose 53%.
- Meritage Homes (NYSE: MTH ) rose 41%.
It obviously helped that D.R. Horton posted a narrower loss than Wall Street was expecting, but a lot of the buzz in the industry is likely the result of the economic stimulus package.
By the time you read this, the dueling proposals from the House and Senate may have met in the middle. The House is proposing a $7,500 tax credit for first-time homebuyers under a certain income threshold. The Senate upped the ante last week, opting for a $15,000 tax credit available to all housebuyers.
Regardless of the size and scope of the credit, it will clearly be a winner for the real estate industry if it passes. The market may initially hop on homebuilders as a logical beneficiary, but I suggest you look elsewhere.
After all, there is already a glut of existing homes, fetching prices that new construction is unlikely to match. There will be a flurry of activity if the housing stimulus passes, but existing homes in developed neighborhoods will likely benefit the most. If last year's spike in gas prices and the current scarcity of jobs have taught us anything, it's that long commutes from the suburbs are no match for being right in the middle of the action.
Find your next home from your home page
So who will make the most of the eventual housing stimulus provision? I think Realtors, lenders, and sites that match sellers and buyers are most likely to thrive. Here are a few companies with online bents that I think are positioned perfectly:
- Bankrate.com (Nasdaq: RATE ) -- It's the leader in tracking interest rates on everything from mortgages to home equity lines. Prospective buyers will be camped out on the site if the stimulus passes, making sure they know what they can afford, given prevailing interest rates. If you think that lenders and other financial institutions are easing up on advertising through Bankrate, think again. Revenue soared 59% in the company's latest quarter.
- Move (Nasdaq: MOVE ) -- One of Move's flagship properties is Realtor.com, the official site for the National Association of Realtors. Brimming with detailed listings of all brokered properties in the MLS platform, it's a no-brainer hub for home searches.
- Internet Brands (Nasdaq: INET ) -- It's been rough sledding for Internet Brands since the company went public just 15 months ago. Then again, when you run a network of sites in out-of-favor niches like cars, travel, and housing, it's hard to draw much of a crowd. Internet Brands' housing-related properties include Loan.com, RealEstateABC, Mortage101.com, and Broker Outpost.
- Tree.com (Nasdaq: TREE ) -- Don't go to Tree.com expecting gardening and planting tips. Tree.com includes sites such as Lending Tree and RealEstate.com. Lending Tree began as a good idea -- the first online exchange between lenders and borrowers -- but there naturally hasn't been much of an appetite to underwrite new home loans in this moribund market. That's starting to change, now that mortgage refinancing rates have became too ridiculously low to ignore, and I suspect the housing stimulus will bring even more business Lending Tree's way.
Dot-com, sweet dot-com
Why am I suggesting online plays for a literally bricks-and mortar industry? Well, many of the real estate agencies have shrunk in scope. Other firms like Realogy, which were once publicly traded as stand-alone companies, went private.
Besides, we live in 2009, where most of our searches begin on the Internet. I think even a beleaguered company like eBay (Nasdaq: EBAY ) , with its countless "by owner" real estate listings, will milk more out of the eventual revival of real estate than conventional agencies.
That's right, Dorothy: There's no place like home page. For investors, that means thinking beyond the homebuilders and agents, and realizing where the real open houses are taking place.
If you're going home-hunting this year, check out: