Americans outraged over the price of gasoline and the sensational profits of oil companies of late should stop a moment and look inward. Not at their souls, but at their homes -- which have appreciated in value at least as much as gasoline, and in many cases much more. According to U.S. Census data, the price of the average home in Los Angeles is up 112% in the past five years, 106% in Miami and 91% in New York. Meanwhile, unleaded gasoline futures traded at the New York Mercantile Exchange are up only around 85%. By the logic of consumers calling for the heads of oil company executives, homebuilders and real estate brokers ought to be on the hot seat too. The fact that all wrath is directed toward energy producers shows a bubbling hostility for the boom-and-bust dynamics of capitalism among those who feel left out of the rising tide of economic growth. The anger also seems to show that energy investing has simply not caught the fancy of the public in the past couple of years in the way that technology investing did back in the 1990s. A lack of widespread jubilation over the terrific escalation in the price of oil company stocks -- as there has been over home prices -- shows that, as I suggested in my column two weeks ago , they probably have a lot farther to go.
Major companies in both industries have experienced rapid income and price gains of late, but the rewards for homebuilders have been a lot more spectacular than for energy producers. Over the past year, the average earnings growth rate of the three largest oil companies in the world is 40%, and their stocks have advanced an average 22% this year. At the same time, the average earnings growth of the three largest U.S. homebuilders is 44%, and their stocks are also up 22% on average.