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

Make a 2500 sq ft House in 20 Hours with a 3D Printer - Seriously!

Now I get it. Now I understand what the big deal is about 3D printing. When I first heard about it, I thought it was sort of a gimmicky technology for hobbyists to 'print' their own three dimensional toys. (I guess that's similar to the old days, when people thought the first Apple (AAPL) computer was just for nerds and geeks to play with.) But after watching this video, which is 12 minutes long by the way, but well worth watching, I now see the long term future potential of the 3D technology from a business standpoint.

The video features University of Southern California engineering professor, Behrokh Khoshnevis, who shows how houses can be built with a large scale 3D printer in only 20 hours. He calls it Contour Crafting. He also talks about the numerous benefits of using this technique beyond just the cost savings for the construction business. There are many social benefits also. The walls that are created are structurally more sound than conventional walls, there are less CO2 emissions generated, less waste,less inefficiency, reduction of construction accidents, and elimination of slums. He believes that the 3D construction industry can create more jobs, offsetting building jobs that would be eliminated. 3D houses can even be all different in a neighborhood, avoiding the tract housing look, by just making a choice in the software.

I guess if we see KB Home (KBH), Lennar Corp. (LEN), or PulteGroup, Inc. (PHM) start to use one of these 3D homebuilding printers, then we will know that 3D is here to stay.

There are a couple of 3D printing stocks that are available to investors, according to the free list at WallStreetNewsNetwork.com. 3D Systems Corporation (DDD), a Rock Hill, South Carolina based company, makes and sells 3D printers and related products. The company recently implemented its Cubify.com 3D @home experience, which allows sharing printable content and has intuitive apps to modify and print creations, along with a Kinect-to-print app powered by Geomagic and many tablet-to-print content creation and manipulation apps are being showcased.

3D Systems, which trades on the New York Stock Exchange, has been around since 1986. The stock trades at 69 times current earnings and 30 times forward earnings. Earnings for the latest quarter were down 37.8%, however, the company had a 51.7% boost in revenues. The company has $158 million in cash and about $140 million in total debt.

Another 3D printer business is Stratasys, Inc. (SSYS), which produces three-dimensional printers, rapid prototyping systems, and related consumable materials. This Minnesota based company was founded in 1989. Latest quarterly earnings tanked by 24.4%, but revenues were boosted by 31.6%. The company is debt free and has $51 million in cash. The stock trades at 76 times trailing earnings and 42 times forward earnings.

Of course you need software to run the 3D printers. Autodesk, Inc. (ADSK) makes 3D software for many different industries, everything from entertainment to architecture to manufacturing. The stock has a price to earnings ratio of 28 and a forward PE of 15, is debt free, and has $1.5 billion dollars in the bank.

For a free list of the companies involved in 3D printing, which can be downloaded, sorted, and updated, go to WallStreetNewsNetwork.com.

Disclosure: Author owns AAPL and DDD.

By Stockerblog.com