Favorites for housing exposure

Government support and low rates make a compelling case for real estate-related stocks.

By TheStockAdvisors May 22, 2013 11:00AM

Home under construction (© Corbis)By Jim Powell, Global Changes & Opportunities Report


The government's biggest stimulus target is now the housing industry. More than any other industry in which we can invest, housing has a mandate to be successful. Without a housing rebound, the economy has little chance of becoming self-supporting again.


Besides the long term capital gains we can expect, housing also offers a good way to convert paper and electronic "wealth" into real, tangible wealth. In addition, real estate is usually a great inflation hedge. If you put all the attractions of the housing sector together, you get what I believe is a compelling case for making an investment.


A housing recovery is already underway, but it's still in its early stages. I think prices will start to move much higher this summer. The big question is, how much higher are prices likely to go from this point?


If you look at the cost of buying a home (including mortgage payments, taxes, and insurance) as a percent of personal incomes, housing is more affordable today than it has been in decades.


Today's low mortgage rates reduce the total cost of a home by many thousands of dollars -- often hundreds of thousands of dollars. That means buyers can pay more for houses than they could when rates were higher -- and that's just what they are doing.


We already have two strong positions in the recovering housing industry, Toll Brothers (TOL) and Equity Residential (EQR).


For broader exposure to the sector, we suggest Weyerhaeuser (WY). New construction is consuming large amounts of lumber and other building materials. One of the biggest suppliers is Weyerhaeuser.


Weyerhaeuser is also a diversified housing company that builds homes and develops residential lots for construction and sale. In addition, the company builds multi-use developments and master-planned communities.


Another division of Weyerhaeuser produces a wide range of paper products for various industries. I think the stock will be a good performer in long-term accounts.


If you would like to combine current income with the probability of attractive capital gains, I recommend and Senior Housing Properties Trust (SNH).


This successful REIT invests in retirement housing, assisted living facilities, nursing homes, and hospitals. The company has a total of 184 properties located in 41 states.


Because SNH is organized as a REIT, it doesn't need to pay income tax if it distributes at least 90% of its earnings to shareholders -- which it does.


Currently, the yield is an attractive 5.60%. With America's baby boomers now entering their golden years, I think Senior Housing has a bright future.


More from TheStockAdvisors.com

0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123
123 rated 1
266
266 rated 2
485
485 rated 3
660
660 rated 4
586
586 rated 5
652
652 rated 6
640
640 rated 7
504
504 rated 8
289
289 rated 9
159
159 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
TAT&T Inc9
VZVERIZON COMMUNICATIONS8
CTLCENTURYLINK Inc8
EXCEXELON CORPORATION8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.