Bank of America Shares Getting Housing Recovery Lift

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NEW YORK ( TheStreet)--Bank of America (BAC) shares have been getting a boost from a slowly improving outlook for U.S. housing, allowing the bank's shares to outperform rivals even during the recent selloff of bank stocks.

Bank of America's shares soared 77.16% while bank stocks rallied from the start of the year through Friday, March 23, far outpacing peers including Citigroup(C) , Goldman Sachs (GS) , JPMorgan Chase (JPM) , Morgan Stanley (MS) and Wells Fargo (WFC) . It was a performance one might expect from a highly volatile stock that was trading far cheaper than peers by several metrics.

Perhaps more impressive, however, has been Bank of America's ability to hold those gains during the subsequent selloff. From Monday, March 26 through Tuesday, Bank of America shares have fallen 24.46%, outperforming JPMorgan, Citigroup and Morgan Stanley, and only slightly worse than Goldman's 22.44% drop. Wells Fargo, widely viewed as the most defensive among the giant U.S. banks, has lost just 3.81% during the selloff.

Put it all together, and Bank of America has been the clear winner so far in 2012, with its shares up 33.81%. Shares of Wells Fargo, the next best performer among the six U.S. banking giants, have posted gains of 17.01%

"If you assume that the core problem at Bank of America is housing, housing has turned around, I think, most people see and therefore the belief is that Bank of America will turn around also," says Rochdale Securities analyst Dick Bove.

Indeed, a look at SPDR S&P Homebuilders (XHB) , an exchange traded fund that tracks homebuilder stocks, supports that thesis. The fund is up nearly 26% year to date, well outpacing all major U.S. stock market indices.

Homebuilder shares were higher on Tuesday following the latest S&P/Case Shiller report on home prices. The same day, Bank of America was among the best performing bank stocks .

Bank of America CEO Brian Moynihan had positive things to say about the housing market during a recent banking industry conference hosted by Deutsche Bank. He was particularly optimistic about a decline in the number of borrowers who are more than 60 days past due on the mortgages to one million, from 1.3 million at the start of 2011 and 1.6 million in late 2010.

"The mortgage market is healing - the housing market is healing, it's not going up, but it's not going down," he said.

That's not to say Bank of America doesn't have other things to worry about. Also on Tuesday, four analysts released bearish reports about Bank of America and other large banks . They cited factors such as the European debt crisis and tougher regulations that have weighed on bank stocks since late March. Still, if housing has indeed stabilized, it would clearly take a big monkey off Bank of America's back .