Housing on the recovery, brings some stocks along with it

The biggest news of today doesn’t directly have to do with the stock market. It has to do with the housing market, which is on the rebound and has given those who are hoping the economy gets its act together a reason for rare optimism.

Not only that, but there is an element of this rebound that does affect stock trading, as companies that rely on the housing market are cleaning up due to the market’s rebound.

For instance, Home Depot (HD) was up by almost 2% Tuesday and was therefore the top performer in the Dow Jones, while Lowe’s also saw a slight gain on the day. In 2013 as a whole, both companies are doing very well and continue to trend reliably upward, undoubtedly benefiting from a housing market that is starting to come alive again.

Traded funds like SPDR S&P Homebuilders (XHB) are up too, with that exchange traded fund in particular seeing a 20% rise this year after an almost 60% gain last year. Companies that are included in the fund, such as Sherwin-Williams (SHW), Leggett & Platt (LEG), Williams-Sonoma (WSM), and Bed, Bath & Beyond (BBBY) have done extremely well in 2013.

Sherwin-Williams, of course, makes paint, while Leggett & Platt makes home furnishings and Williams-Sonoma is a kitchen supply retailer.

What is helping the housing market come back from the dead? Well, the Federal Reserve has kept interest rates extremely low for quite some time now, and mortgage rates remain low thanks to bond and mortgage-backed purchases of securities, as well.

Many were shaking off the idea of a housing bubble already, even though homebuilders like PulteHome (PHM), D.R. Horton (DHI), and Lennar (LEN) floundered on Tuesday in the S&P 500. After all, these stocks were on 52-week highs and it’s quite likely that some investors were just prematurely taking their money back to avoid a loss.

This new reality is just an extension of what many housing market-related companies were predicting months ago. For instance, Valspar (VAL), a paint manufacturer, said earlier this month that housing is on the rise, while Move (MOVE), an online real estate listing firm, said the same.

Developer Brookfield Residential Property (BRP) said that “the housing recovery appears to be in full swing”, and they seem to be right at this point. While cautious optimism is always the responsible route, it’s hard not to hope that the housing market coming back will lead to job and overall economic growth, too.