Home Builders Soar On Lower Mortgage Rates, But Pain Persists

Improved mortgage rates sent shares of home builders higher Wednesday, but no one thinks the residential crisis is over.

As consumers raced to lock in lower rates, applications to refinance existing loans jumped 203.3% last week from the week before, while mortgage applications to buy a home climbed a seasonally adjusted 38%, according to the Mortgage Bankers Association's weekly survey.

That news, a result of the U.S. government's recent pledge to inject $800 billion into the ailing credit markets, gave the building sector a boost. The Dow Jones US Home Construction Index jumped, most recently up 6.10%, led by Beazer Homes USA's (BZH) stock rising 19% to $1.65. Other builders that gained included Meritage Homes Corp. (MTH), up 9.5% to $10.82; Hovnanian Enterprises ( HOV), up 13% to $2.08, and Standard Pacific Corp. (SPF), up 7.4% to $1.75.

Of course, the continued housing downturn has left building shares so depressed that large percentage gains can involve small monetary movements. Still, the mortgage headlines were welcome news for watchers of both new and existing housing markets. Mortgage rates have remained stubbornly high - despite widespread government efforts to bring them down - and an activity flurry shows pent-up demand.

These reduced rates will assist cash-strapped Americans and help homeowners avoid adding to the swelling foreclosure counts. read more