Housing Stocks Soar…Upwards?
In a surprise which only serves to illustrate that random state of the Stock Market, the housing stock index jumped with it’s greatest one day gain in five years.
Unfortunately, this is not a sign of a housing recovery.
CNBC explains the reason for this odd event:
The Dow Jones U.S. Home Construction Index, a yardstick that measures home builder performance, rose 8.1 percent in mid-afternoon trading.
“When you see this kind of move it’s because the stocks are over-shorted,” said Alex Barron, Agency Trading Group analyst.
Investors who short stock bet that the price of the shares will fall. They borrow the shares on the hopes that they’ll replace them with shares they’ll purchase at a lower price.
“As soon as the stocks start to go in the opposite direction people rush to cover their gain,” Barron said.
While this is unlikely to signal a positive future for housing stocks, it did give a glimmer of home to builders and second mortgage lenders.
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