The Housing Downturn Hits Home Depot Stock

"The real estate sector's hard times have filtered through to the large-scale retailers who supply the basic building ingredients. Retailer Home Depot (NYSE: HD) reported weak results for the third quarter on Nov.14 ... on cooler activity in the sector.

HD is also predicting a chilly fourth quarter, with per-share profits falling 12% to 16% from a year ago. "I still think we have deeper to go than we have seen," CEO Bob Nardelli said on a conference call with analysts. "I do not think we have seen bottom yet. I do not see anything that says it's going to get significantly better in '07. "

Real Estate Mutual Funds Riding High

"Mutual funds that specialize in real estate are still flying high, benefiting from their exposure to commercial property through holdings in real estate investment trusts. Slower home sales [means] more people opt to rent, pushing rents higher and boosting profits at apartment REITs... Investors look to real estate to diversify their portfolios. For that reason, real estate fund managers typically try to generate returns that have a low correlation to the equity market... [The] only concern about apartment REITs is that they are overvalued. Overseas real estate investments are more attractive."