Investors should keep an eye on interest rates and the housing recovery as two major indicators of overall economic health going into the Federal Reserve Board meeting Tuesday, according to one analyst.
Thirty-year fixed-rate mortgages have reached all-time lows and housing inventories are tight, and that's driving the housing recovery, according to Kevin Divney, chief information officer at Beaconcrest Capital Management. "With interest rates now going up, there could be some investors or buyers in the sidelines who may be coming in," scrambling to lock in low rates, Divney said. Americans also may be more likely to sell their homes in order to relocate for better jobs, he said.
Unemployment and underemployment are also on Divney's radar.
"We saw in the last unemployment report, employment actually ticked up because new entrants came back into the market because they're seeing the labor market doing a lot better," Divney told "Big Data Download." "And a lot of those underemployed and people out of the workforce could be coming in. As a result, more Americans will be able to contribute to the overall economy by buying a house or making home improvements," Divney added.
Not only are home builders like Toll Brothers (TOL), D.R. Horton (DHI), KB Home (KBH) and Lennar (LEN) faring well as a result, but companies like Home Depot (HD) and Trex (TREX), which cater to existing home owners, stand to benefit from a housing market that's continuing to improve, Divney said.
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