It's hard to imagine a sector better suited to this low interest environment than the homebuilders. Think about it. Rock bottom borrowing costs stretch the value of the home buyer's dollar, while at the same time, giving the builders pricing flexibility along with hungry demand.
It should come as no surprise that builder Lennar
The company expects to earn $10.50 a share this new fiscal year and $12 come fiscal 2005. But before you start drooling over the prospect of buying Lennar today for just eight times forward earnings, check the prevailing winds.
The company has revised its targets higher as a backlog of new home orders offers near-term visibility, but rising rates could just as quickly give that momentum a painful wedgie.
That is why just about every homebuilder trades at an earnings multiple in the pre-teens or lower right now. Despite the record results and the heady gains over the past couple of years, investors know how quickly things can turn.
With companies like D.R. Horton
So, the next time you scout out the housing sector, check those "cheap" valuations at the door. Once rates start to rise and earnings start to fall this industry won't feel so cheap anymore.
Have you checked out our Home Center? Are you worried that today's low mortgage rates may be fleeting, and with them aspirations of landing your dream home? All this and more -- in the Building/Maintaining a Home discussion board. Only on Fool.com.