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6 Ways To Capitalize On A Recovery In The Real Estate Markets

It seems like signs of economic recovery are beginning to pop up everywhere these days. Even reports that would have been interpreted as bearish just a few months ago are now being viewed as positive by the markets. It seems that almost everyone has acquired an optimistic viewpoint these days.

The increasing optimism is particularly evident in the real estate markets. The recovery in the real estate markets is now being heralded by financial pundits everywhere. On June 16th, Mad Money host Jim Cramer boldly announced that the housing market had bottomed.

The numbers seem to be supporting these bullish claims as well.

• July existing home sales increased 7.2% and have now risen four months in a row.

• Home prices increased 3% in the second quarter, marking the first increase in three years according to the Standard & Poor’s/Case Shiller’s national home price index.

• Single family new housing starts increased 1.7% in July.

• New home sales increased 9.6% in July.

• Inventory for new homes now stands at 7.5 months, the lowest level in 16 years.

• The National Association of Realtors Pending Home Sales Index rose 3.6% during July marking the fifth straight month of increases.

• The NAR’s Housing Affordability Index continues to show signs of improvement.

• Mortgage rates continue to remain at abnormally low levels and currently average only 5.3% for a 30-year fixed loan.

In addition to these “green shoots” within the housing markets, the government’s $8,000 first-time homebuyer’s credit remains in effect until November 30, 2009.

So how can investors capitalize on the recovery in the real estate markets?

Buy A House
If the real estate markets have indeed hit bottom, now would be a perfect time to buy a new home. This is a particularly attractive option to first-time homebuyers who don’t have to worry about selling their existing home. They also have the benefit of low mortgage rates and the $8,000 tax credit.

The glut of foreclosure properties on the market today also presents some attractive opportunities to pick up rental properties.

However, not everyone wants to become a landlord or is prepared to sink a large amount of money into a home. Never fear, here are five additional ways for investors to capitalize on the housing market recovery.

Real Estate ETF’s
One of the simplest ways to invest in real estate is to buy a real estate ETF like ICF [[ICF]] or IYR [[IYR]].

Home Builder Stocks
You could capitalize on the improvement in new home construction by investing in the companies building the homes like Toll Brothers [[TOL]], KB Homes [[KBH]], DR Horton [[DHI]], Lennar [[LEN]] or Brookfield Homes [[BHS]].

Home Improvement Retailers
A good way to play both the improvement in new home construction and the increase in existing home sales is to buy home improvement retail stocks. Increasing numbers of home builders, home buyers and home sellers are all positive developments for Home Depot [[HD]] and Lowes [[LOW]].

Real Estate Mutual Funds
Another easy way to invest in real estate, is to buy shares of a real estate mutual fund. There are currently over 200 real estate mutual funds available.

Banking Stocks
Increasing economic stability and rising home prices should benefit large banking stocks like Bank of America [[BAC]], JP Morgan [[JPM]] and Citigroup [[C]] with their broad real estate exposure.

Of course there still remains a great deal of uncertain regarding a recovery in the real estate markets as well as the broader economy. No one knows for sure what “shape” this recovery will take. However, given the severity of the downturn in the housing markets over the last few years, we are likely to see at least some recovery in the real estate markets over the next few months.

Filed in: Economics

One Response to “6 Ways To Capitalize On A Recovery In The Real Estate Markets”

  1. August 26, 2009 at 4:37 pm #

    Those are good tips. Never thought about investing in real estate stocks. They only have room to go up. Good tip.