Is Your Portfolio Ready to Rebound With Housing?
The housing market has been in terrible shape for almost three years now, setting off a banking crisis, a massive federal bailout, and panicking markets across the globe. Foreclosures dominate the headlines and millions of homeowners are underwater on their mortgage, as home prices surged south like Sherman marching on Atlanta — with the same outcome, sadly.
New data Tuesday suggests that perhaps the housing market is turning around. For the first time in nine months, the S&P/Case Shiller 20-city index, which measures the housing market, saw prices rise 0.7% compared with March. While this isn't necessarily the beginning of a housing boom, it is positive news enough to start thinking about trading strategies for when the market truly does turn around.
At the top of the list? Homebuilders, many of whom suffered mightily the last three years, and all of whom could be in for a rise when housing comes back up. Here are a few of the homebuilding stocks that could benefit when it does.
KB Home (NYSE: KBH) KB Home constructs and sells homes under the name KB Home through its operating divisions. Their homebuilding operations provide a range of homes designed primarily for first-time, move-up and adult buyers, including attached and detached single-family homes, townhomes and condominiums.
PulteGroup (NYSE: PHM) PulteGroup is a holding company with homebuilding subsidiaries, although they also have mortgage banking operations. Their homebuilding business involves the acquisition and development of land primarily for residential purposes and the construction of housing for first-time, first and second move-up, and adult home buyers.
Toll Brothers (NYSE: TOL) Feeling luxurious? Toll Brothers designs, builds, markets and arranges financing for single-family detached and attached homes in luxury residential communities. The Company caters to move-up, empty-nester, active-adult, age-qualified and second-home buyers. If the wealthy truly are the leading edge of the recovery, Toll Brothers might be the first housing stock to tick upward, as their clientele would be best positioned to buy a new home.
Meritage Homes Corporation (NYSE: MTH) One regional company to look out for is Meritage Homes. Meritage Homes is a designer and builder of single-family attached and detached homes in the southern and western United States. If those regions move up, particularly if they move up before the entire country moves up, this stock could gain — particularly if investors are focused on the national numbers and miss a regional jump among Meritage's client base.
Standard Pacific (NYSE: SPF) Standard Pacific is a geographically diversified builder of single-family attached and detached homes. The Company constructs homes within a range of price and size targeting a range of homebuyers, making it another play for those who are unsure whether any housing boom would favor lower or higher income buyers.
SPDR S&P Homebuilders ETF (NYSE: XHB) If you want to skip trying to pick individual stocks and mirror the entire housing market, one ETF to consider is SPDR S&P Homebuilders ETF. This fund seeks to replicate as closely as possible the performance of the S&P Homebuilders Select Industry Index. Short version: When housing finally goes up, this fund will almost certainly rise with it.
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