Denny Reichard, an agent with Jim Maloof Realtors, right, stands with potential home buyers Brian Giebelhausen and Lindsay Willing outside a previously owned home in Mackinaw, Ill., on Monday, April 21, 2014. © Daniel Acker, Bloomberg via Getty Images

Compiled from StockScouter ratings by Verus Analytics

Sales of new homes jumped 6.4 percent in April, more than expected and enough to spark a rally Friday in homebuilder stocks such as Lennar (LEN) and DR Horton (DHI). And on Thursday, the National Association of Realtors reported that sales of existing homes -- which account for nearly 90 percent of housing transactions in the U.S. -- rose 1.7 percent last month after a sluggish start to the year.

Meanwhile, even as the Federal Reserve continues tapping the brakes on its bond-buying program, 30-year mortgage rates have stayed relatively low through the spring home-buying season, falling to 4.14 percent this week.

All of this is good news for residential mortgage lenders, such as Huntington Bancshares (HBAN) and KeyCorp (KEY). Both Ohio-based banks appear on StockScouter’s latest list of 10 stocks to watch, along with national mortgage giant Wells Fargo (WFC).

Lenders aren’t the only beneficiaries of a strong housing market, of course. Also on this week’s list are a pair of high-yielding real estate investment trusts, or REITs, and a home improvement retailer.

Commercial and retail property firm Northstar Realty Finance (NRF) pays a 6.4 percent dividend, while Annaly Capital Management (NLY), a mortgage REIT that has begun to wade into commercial properties, offers an even more substantial 10.2 percent yield. Hardware and home improvement chain Home Depot (HD), which pays a 2.4 percent dividend, also made the cut.

Shares of Huntington and KeyCorp both get a ‘10’ from the StockScouter rating system on MSN Money, the highest score possible. Based on StockScouter’s analysis, shares of HBAN and KEY are expected to significantly outperform the market over the next six months with very low risk.

Read the full Scouter reports on Huntington Bancshares here and KeyCorp here.

StockScouter Top 10 for May 23

Company

Sector

Dividend yield

Forward P/E

Scouter score

Huntington Bancshares (HBAN)

Regional banks

2.2%

11.8

10

KeyCorp (KEY)

Regional banks

2.0%

11.610

Southwest Airlines (LUV)

Airlines

1.0%

14.1

10

Annaly Capital Management (NLY)

Real estate investment trust10.3%7.110

NorthStar Realty Finance (NRF)

Real estate investment trust6.4%16.410

American International Group (AIG)

Insurance

0.9%

10.0

9

21st Century Fox (FOXA)

Media

0.7%

18.6

9

Home Depot (HD)

Home improvement retailer

2.4%

15.6

9

AT&T (T)

Telecommunications

5.2%

11.3

9

Wells Fargo (WFC)

Banks

2.8%

11.6

9

StockScouter beats the market

We think the StockScouter rating system developed by Verus Analytics for MSN Money is one of the best tools you can use when you're trying to decide where to invest.

StockScouter looks for stocks whose business fundamentals, price behavior, valuation and stock-ownership characteristics appear to predict a rising price in the future, based on how those factors have influenced stock prices in the past.

The system assigns each stock an expected six-month return and balances that return against the stock's expected volatility.

Scouter rates stocks on a scale of 1 to 10, and ratings can change daily. Ratings and data in the chart above were current as of this article's publication date.

In addition to the daily top 10 list described above, StockScouter is used by investment research firm Verus Analytics (previously known as the quantitative business unit of Gradient Analytics) to generate a monthly benchmark portfolio of stocks that, refreshed monthly, has outperformed the market since its inception in August 2001.

An investor who began in 2001 by investing in each of the benchmark portfolio's top 10 stocks at the start of the month, selling them at the end of the month and then starting fresh with a new group of 10 stocks, would have generated returns, before trading costs and taxes, of 1,026 percent through April 30, 2014.

Click here to become a fan of MSN Money on Facebook

Writer Jon Markman, at the time a columnist for MSN Money, collaborated with company researchers on the tool.

Markman suggested rolling over the top 10 stocks every six months to hold down trading costs, a strategy that might be a better fit for most investors; that would yield different results, which would vary based on your starting point.

Performance through April 30, 2014

Full 50 position portfolio    

Index

1 month

3 month

6 month

1 year

Since
inception

Average
annual
return

Portfolio

-1.7%

3.6%

5.9%

14.5%

581.6%

16.8%

Nasdaq

-2.0%

0.3%

5.0%

23.6%

103.0%

7.6%

S&P 500

0.6%

5.7%

7.3%

17.9%

55.5%

4.7%

DJIA

0.8%

5.6%

6.7%

11.7%

57.6%

4.7%

Top 10 portfolio

Index

1 month

3 month

6 month

1 year

Since
inception

Average
annual return

Portfolio

-3.7%

4.9%

7.5%

4.6%

1,025.7%

20.7%

Nasdaq

-2.0%

0.3%

5.0%

23.6%

103.0%

7.6%

S&P 500

0.6%

5.7%

7.3%

17.9%

55.5%

4.7%

DJIA

0.8%

5.6%

6.7%

11.7%

57.6%

4.7%

Inception: August 2001