Housing Still Booming In Brazil

While the U.S. housing sector seems to be stuck in reverse gear, Latin America's home builders continue to boom. According to the Brazilian Association of Real Estate and Tourism, the nation faces a shortage of almost 8 million homes. This boom is being driven by the growth of new potential buyers. Brazil's middle class currently comprises about 50% of its total population. As commodity prices have risen, so have personal incomes. The continued vigorous long term macroeconomic outlook has added to the housing frenzy. Many analysts suggest that the Brazilian housing market has been “unattended for 20 years” and offers tremendous potential for growth. The Brazilian government is finally helping tap into that potential by recently announcing a new $47.3 billion program that will run until 2014. The Minha Casa Minha Vida (My Home, My Life) project will offer below-market rate loans for developers to build affordable housing, and get people financing for their first home. Already the program has found success in creating more than 1.3 million new homes or about 30% more than its initial target. For investors, the long term potential of Brazil's and Latin America's housing market seems robust, especially when compared to the anemic U.S. market. Both Brazil's Gafisa S.A.

and Mexico's Homex

represent two ways to play this expanding market. Both trade for P/E's of less than 10 and offer a great way to bet on LatAm's new home buyers.