This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

A 2012 Housing Rebound Can't Save Bank of America

Stocks in this article: BAC WFC JPM

Housing story updated with most recent data.

NEW YORK ( TheStreet) -- So what are the odds of a strong housing rebound in 2012?

Right now, economists think it is pretty remote. Housing prices are, at best, expected to bottom in the second half of 2012, according to consensus estimates. And once it finds bottom, it is expected to languish there for another couple of years as excess supply continues to strangle prices.

So if you are looking for a "black swan" event with a positive spin for 2012, it does not get better than a robust recovery in housing. It is the stuff you dream of if you have an underwater mortgage- or if you are Bank of America's (BAC) CEO Brian Moynihan.

An improvement in housing will no doubt help the home-building sector and related industries. But it will also be a big catalyst for bank stocks, with the fortunes of the sector deeply tied to the economy and the problems in housing.

>>6 Homebuilder Stocks in Rally Mode

"If you see high single-digit or low double-digit growth in housing, that will get people excited about financials, especially bank stocks," according to Frederick Cannon, analyst at KBW.

Cannon expects Wells Fargo (WFC) to be the biggest beneficiary of a turnaround in housing. "Wells has maintained its presence in the mortgage origination market and is poised to grow mortgage origination business if housing recovers," he said.

>>Cramer: Put Wells Fargo in Charge of Housing

One might expect the stock of Bank of America, which has been weighed down the most among the large banks by its mortgage woes, to do better if housing recovers. However, Cannon says it would take a lot more for the bank to resolve its problems. "Unless the housing market goes up 30% to 40%, those legacy assets are going to continue to be an issue for a long time."

Bank of America, JPMorgan Chase (JPM) and Wells Fargo are the biggest players in the mortgage origination business. However, Wells derives a bigger chunk of its business from mortgage banking compared to its larger rivals.

Recent housing data has sent confusing signals about the direction of the housing market. The S&P Case-Shiller Housing Price Index showed home values in the 20-city composite falling 3.4% in October on a year-on-year basis and 1.2% over September. Meanwhile, pending home sales, a forward looking indicator of existing home-sales activity showed signs of improvement, increasing 7.3% on a monthly basis to 100.1 in November, its highest level in 19 months.

While it is hard to imagine the current housing slump suddenly turning around to post double-digit growths, some unforeseen developments could ease the situation in housing, according to analysts.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs