Will Fed rate cut provide base for builders?

September 19 2007 MarketWatch.com Although Tuesday's Federal Reserve rate cut may soothe the market's psyche, it will have little impact on the main problems in the housing market, such as the inventory glut, falling home prices, a difficult mortgage market and rising foreclosures, according to a Morgan Stanley analyst. "While the Fed rate cut will likely help some homeowners with adjustable-rate mortgages that are about to reset, we believe it will have little overall impact on housing fundamentals," wrote Robert Stevenson in a report to clients Wednesday. He said he remains cautious on home-builder stocks "and would look to short the group should it trade meaningfully higher in the absence of further rate cuts."

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