How to Play the Real Estate Recovery

First there is the anecdotal evidence. I know of a Sacramento couple that has put offers on eight homes in the last three months, all above the asking price, and getting outbid on all of them, mostly by all cash buyers according to their real estate agent. I have a friend who recently sold his house in Pleasanton, California, who received several all-cash offers way above the asking price, and closed escrow in thirty days. A house in my neighborhood sold within six hours of listing.

Now the statistical evidence. According to the Standard & Poor's/Case-Shiller Home Price Index, which is the leading measure of U.S. home prices, home prices rose 4.3% in the 12 months ending in October. The fact that home prices is good, though you may think that 4.3% isn't that much. However, what many analysts fail to take into account is that most people (although recently that seems to be changing) do not pay all cash for a house. They generally put 10% to 20% down.

What that means is that if you had purchased a home last year with a 20% down payment, and the home price rose by 20%, the return on the down payment would actually be 21.5%, in simple terms. This of course assumes all other things being equal, i.e. the mortgage, taxes, insurance, etc. being covered by rental income or an alternative to paying rent if living in the house.

If the down payment is only 10% with the same assumptions, the return would be double that. And if you have owned your house for a few years and lost all your equity, your gain during the last year would be infinite.

The reasons for these real estate gains are several. First, the Federal government has kept mortgages artificially low, making it easier for home buyers to qualify. Second, there have been an influx of foreign buyers willing and able to pay all cash for homes. Third, because of the cutback in the building of new houses, the inventory of available homes for sale has been constricted. Fourth, real estate has been extremely depressed for a few years, with a bounceback being inevitable.

So what is an investor to do who wants to play the single family home real estate market without having to buy a rental house? Most of the residential real estate investment trusts, such as Aimco (AIV), AvalonBay Communities (AVB), and Home Properties (HME), invest in apartment houses. To invest in single family homes, you have to dig further.

Silver Bay Realty Trust (SBY) owns a portfolio of over 3,100 single-family residential properties through entities associated with Two Harbors Investment Corp. (TWO), and Provident Real Estate Advisors LLC. The company just went public in mid-December with 13.25 million shares in the IPO at $18.50 per share. Several officers and directors purchased the stock. Although falling about 2% after the IPO, the stock is now up 14 cents from its new offering price.

Then there are the homebuilder stocks, but most of those have already had a substantial move this year. PulteGroup (PHM) is already up 179% this year, KB Home (KBH) is up 128%, and Lennar (LEN) is up 89%.

Last but not least, the real estate brokers are doing quite well. The biggest pure play in this arena is Realogy Holdings Corp. (RLGY), which franchises the Century 21, Coldwell Banker, ERA, Sotheby’s International Realty, Coldwell Banker Commercial, and Better Homes and Gardens Real Estate brand names. The stock trades at 33 times forward earnings, and posted a quarterly revenue increase of 10.9% year-over-year with negative earnings.

If you think that real estate is on the move in all areas (apartments, commercial, industrial, etc.), you can access the free lists of REITs with High Yields and Residential REITs with High Yields at WallStreetNewsNetwork.com.

Disclosure: Author owns SBY and has a long option position in RLGY.

By Stockerblog.com

Stocks Going Ex Dividend the Fifth Week of December

Here is our latest update on the stock trading technique called 'Buying Dividends'. This is the process of buying stocks before the ex dividend date and selling the stock shortly after the ex date at about the same price, yet still being entitled to the dividend. This technique generally works only in bull markets. In flat or choppy markets, you have to be extremely careful, and may need to avoid the technique during those times.

In order to be entitled to the dividend, you have to buy the stock before the ex-dividend date, and you can't sell the stock until after the ex date. The actual dividend may not be paid for another few weeks. WallStreetNewsNetwork.com has compiled a downloadable and sortable list of the stocks going ex dividend during the next week or two. The list contains many dividend paying companies, all with market caps over $500 million, and yields over 2%. Here are a few examples showing the stock symbol, the market capitalization, the ex-dividend date and the yield.

Arthur J. Gallagher & Co. (AJG) market cap: $3.3B ex div date: 12/28/2011 yield: 4.5%

AvalonBay Communities, Inc. (AVB) market cap: $11.2B ex div date: 12/28/2011 yield: 3.0%

BancFirst Corporation (BANF) market cap: $500.2M ex div date: 12/28/2011 yield: 3.3%

Boardwalk REIT (BOWFF) market cap: $2.3B ex div date: 12/28/2011 yield: 3.6%

General Growth Properties, Inc (GGP) market cap: $12.2B ex div date: 12/28/2011 yield: 3.1%

Illinois Tool Works Inc. (ITW) market cap: $20.6B ex div date: 12/28/2011 yield: 3.4%

National HealthCare Corporation (NHC) market cap: $488.4M ex div date: 12/28/2011 yield: 3.4%

TransCanada Corporation (TRP) market cap: $27.3B ex div date: 12/28/2011 yield: 4.1%

B&G Foods, Inc. (BGS) market cap: $983.6M ex div date: 12/28/2011 yield: 4.5%

Air Products & Chemicals, Inc. (APD) market cap: $16.2B ex div date: 12/29/2011 yield: 3.0%

Raytheon Company (RTN) market cap: $14.9B ex div date: 12/30/2011 yield: 4.0%

The additional ex-dividend stocks can be found at wsnn.com. (If you have been to the website before, and the latest link doesn't show up, you may have to empty your cache.) If you like dividend stocks, you should check out the high yield utility stocks and the Monthly Dividend Stocks at WallStreetNewsNetwork.com or WSNN.com.

Dividend definitions:

Declaration date: the day that the company declares that there is going to be an upcoming dividend.

Ex-dividend date: the day on which if you buy the stock, you would not be entitled to that particular dividend; or the first day on which a shareholder can sell the shares and still be entitled to the dividend.

Monthly Dividend Stock List
Record date: the day when you must be on the company's books as a shareholder to receive the dividend. The ex-dividend date is normally set for stocks two business days before the record date.

Payment date: the day on which the dividend payment is actually made, which can be as long at two months after the ex date.

Don't forget to reconfirm the ex-dividend date with the company before implementing this technique.

Disclosure: Author did not own any of the above at the time the article was written.

By Stockerblog.com

Top Yield Residential REITs: Why 4.7% is better than 16.9%

In spite of the fact that 30 year mortgages are at the lowest rate in over 50 years, it is still very hard for potential home-buyers to get a mortgage. Lenders require higher down-payments, greater proof of income, and higher credit scores. The free-for-all loans of a few years ago are long gone. So what do the non-homeowners do? If they don't move in with their parents or in-laws, they rent. The best way for an investor to play this opportunity is through residential equity real estate investment trusts, such as Home Properties Inc. (HME).

Of course, there are mortgage income REITs with extremely high yields, such as Two Harbors Investment Corp. (TWO), which yields 16.9%, but I don't think that kind of yield is sustainable; plus, the trust invests in mortgages that include Alt-A mortgage loans, subprime mortgage loans, and derivatives.

However, Home Properties directly owns and operates apartment communities throughout the eastern United States. The stock trades at 17 times forward earnings. The operating cash flow of $151.5 million significantly exceeds its dividend payouts of $87 million by over 70%. Home Properties yields 4.7%, much higher than some of its competitors, such as Apartment Investment & Management Co. (AIV) which yields 1.8%, and AvalonBay Communities Inc. (AVB) which yields 3.2%. On September 30, KeyBanc Capital Markets upgraded Home Properties from a Hold to a Buy.

Another residential equity REIT with a decent yield is Mid-America Apartment Communities Inc. (MAA), which pays 4.1%, and serves the Sunbelt area. The stock trades at 16 times forward earnings. The operating income of $129.8 million greatly exceeds the total dividend payouts of about $80 million. Jeffries recently initiated coverage on the company, giving it a Hold rating.

If you like the idea of investing in residential REITs, you should check out the free list at WallStreetNewsNetwork.com, which includes the stock symbols, market caps, forward PE ratios, and yields.

Disclosure: Author does not own any of the above.

By Stockerblog.com