Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

How to Capitalize on the Housing Recovery


Even when government policy is making the road muddy.

Editor's Note: This content was originally published on the Buzz & Banter (click for a free trial).

If the charts below were of stocks, which one would you buy?


Click here to enlarge


Click here to enlarge

I'll give you a hint, you'd much rather send your kids to school in 94702 than 94608.

These two neighboring zip codes in San Francisco illustrate the ongoing dichotomy in the housing market. Low-end markets, boosted by cheap prices and artificially constrained supply (thanks to government programs), are seeing stabilizing, if not rising, prices, as buyers rush to miss the next boom. Higher-end markets, slower to correct during the meltdown of the past three years, are drifting slowly downward as prices return to more healthy levels.

94702 is a swath of Berkeley, California, a somewhat affordable (by Bay Area standards) yet desirable area to put down roots. Prices didn't start to slide until the beginning of 2007 and we're now back to where values were around 2004, right in the middle of the housing boom.

94608 is the northern chunk of neighboring Oakland, an area that, while quite a bit rougher than Berkeley, is seeing fundamental growth due to local development and an influx in more affluent buyers into a formerly undesirable part of town. Prices got ahead of themselves, to be sure, but after tumbling all the way down to 2001 values, both investors and owner occupiers have stepped back into the market.

Ultimately, even zip code-level metrics like these mask the movements going on in individual neighborhoods, but they're useful to pick up the broad trends at play across the country. Just as Minyanville's Kevin Depew likes to look for stocks that diverge from the trends displayed by the broader equity markets, when looking for opportunities in real estate on the other side of the housing bust, you want to look out for neighborhoods that have fundamental catalysts for growth -- not just prices that have come down 50%, 60%, or even 70% from the peak.

The elephant in the room, of course, for any argument that homes may not be a terrible investment right now (no matter where you're looking), is government policy. Interest rates, rumblings of tightening FHA mortgage programs, and regulation all loom large over our nascent, albeit manufactured housing recovery. The future is indeed murky, but more opportunities are presenting themselves every day, if you know where to look.

Looking for trading ideas, market insights & daily flow from top professional? Buzz & Banter connects you to Todd Harrison and 30 pros in real-time each day. 14 day FREE trial.
< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opin= =3D =3D3D ion about the performance of securities and financial markets by = the wr=3D iter=3D3D s whose articles appear on the site. The views expresse= d by the wri=3D ters are=3D3D not necessarily the views of Minyanville Medi= a, Inc. or members=3D of its man=3D3D agement. Nothing contained on the web= site is intended to con=3D stitute a recom=3D3D mendation or advice address= ed to an individual investor =3D or category of inve=3D3D stors to purchase= , sell or hold any security, or to =3D take any action with re=3D3D spect t= o the prospective movement of the securit=3D ies markets or to solicit t=3D= 3D he purchase or sale of any security. Any inv=3D estment decisions must b= e made =3D3D by the reader either individually or in =3D consultation with = his or her invest=3D3D ment professional. Minyanville write=3D rs and staff= may trade or hold position=3D3D s in securities that are discuss=3D ed in = articles appearing on the website. Wr=3D3D iters of articles are requir=3D = ed to disclose whether they have a position in =3D3D any stock or fund disc= us=3D sed in an article, but are not permitted to disclos=3D3D e the size o= r direct=3D ion of the position. Nothing on this website is intende=3D3D d = to solicit bus=3D iness of any kind for a writer's business or fund. Mi= ny=3D3D anville mana=3D gement and staff as well as contributing writers wi= ll not respo=3D3D nd to em=3D ails or other communications requesting inves= tment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos