The sound of hammering at many new-housing construction sites around the United States these days is beautiful music to more than just builders.
It is also a promising tune to hundreds of home-supply firms, furniture and carpet makers, equipment-rental companies, and appliance manufacturers.
Virtually all ancillary businesses linked to the housing and home-improvement markets - including firms such as Bed Bath & Beyond, Lowe's, and Home Depot - are getting a lift.
For investors looking for a place to grow their hard-earned dollars, the housing and home-improvement sectors have been among the few upbeat areas in a generally sluggish economy.
"Housing has been the one spot of light in the overall stock market," says Bryan Piskorowski, a market commentator with Prudential Securities.
The big question now facing Wall Street is whether the housing market will remain vibrant.
So far, no clear consensus exists on how it will fare in the months ahead. In July, for example, sales of new homes rose 4.9 percent. While existing home sales dropped a little that month, they still remain at historically high levels.
Reasons for the housing market's rise include continued increases in population, low interest rates, and the availability of scores of programs designed to facilitate home ownership for younger families and minorities.
Still, some industry analysts fret that the housing boom may be tapering off.
Sales are down in many parts of the US, and particularly at the pricey end of the upscale resale market, says Mallica Ishwaran, an economist with the Jerome Levy Economics Institute, in Mt. Kisco, N.Y.
Tax rebates may help keep the housing sector aloft for a while, but Ms. Ishwaran believes that it will fall into negative territory soon, based, in part, on "deterioration in employment and falling personal income."
But a declining housing market, she adds, does not necessarily spell the end of good times for the ancillary home-improvement market.
"Mortgage refinancing continues to grow," Ishwaran says, as homeowners tap the sometimes-inflated equity in their homes. The Refi Monthly Index on refinancing, published by the Mortgage Bankers Association in Washington, has been rising.
That "cashout," Ms. Ishwaran says, will act as a cushion for the home-improvement market as homeowners pour some of the money into renovation projects.
Lyle Gramley, consulting economist for the Mortgage Bankers Association and a former member of the Federal Reserve Board, is more upbeat about the overall housing sector. He maintains that it will hold its own, with new-home construction hanging on at about 1.6 million annually.
"We do not see the housing market collapsing," he says.
In fact, Mr. Gramley expects it could get a boost next year if interest rates stay low and the economy improves. He believes the economy has already bottomed out, and "a recovery is now under way."
"Assuming that there is a soft landing for the economy," the home-building market could do very well in the latter part of 2001 and early 2002, says Charles Reinhard, an investment strategist with Lehman Brothers in New York.
Even when there are hard landings, home-related companies tend to match the broader stock market. Historically, he says, home-building and home-improvement firms outperform most of the market in the early stages of an economic recovery.
Many home-improvement firms have taken advantage of the recent strength in the housing market as well as the refinancing boom. Home Depot, for example, opened its newest Expo Design Center, in Bethesda, Md., last month. The company now has some 33 Expo stores that offer a variety of design services for home improvement.
Analysts list at least three ways for investors to stake out a position in the home-building/ household-furnishings sector:
Buy into a select mutual fund geared to the sector, such as Fidelity Home Finance, or Fidelity Construction and Housing. Each fund is up for the year. But some analysts are wary of such broad-based home-sector funds. Jim Lowell, who tracks Fidelity funds through his "Fidelity Investor" newsletter, has a sell recommendation on both funds, based on slowing economic conditions.
Buy individual stocks of companies in the sector. Selectivity is crucial, experts agree.
Invest, through mutual funds or stocks, in financial firms linked to the housing market. Examples include banks, savings and loans, and real estate investment trusts. REITS are often involved in office construction. But a number of them also participate in the multiple-family housing sector.
Home-construction companies that have performed well during the past year include Meritage Corp., up more than 200 percent for the year ending Aug. 30; Beazer Homes USA, The Ryland Group, Southern Energy Homes Inc., NVR, and Lyon William Homes, all up more than 100 percent.
Experts point out that a person buying into the housing or home-improvement industries needs a long-term view. The industry can fluctuate wildly for short periods during turbulent market conditions.
The housing industry is also, of course, highly sensitive to interest-rate changes. If the Federal Reserve stops cutting interest rates, - or if rates begin creeping up again - the impact on the home industry could be immediate and adverse.