Turns out, some savvy pros are finding the sunny side of all those falling home prices and foreclosures. How to venture safely into the sector.
To most people, U.S. real estate still stinks. More than a third of all mortgages are under water, with their holders owing more than their houses are worth. Home prices continue to fall in many areas of the country, and thousands of foreclosed homes are still waiting to be sold. Yet an investor no less than Warren Buffett recently said that if he could, he would buy up a couple of hundred thousand single-family homes.
To Buffett and others with short memories or long time horizons, the investment opportunity created by the housing bust is just that great. Buying up subdivisions full of houses isn’t quite practical, so instead, many savvy pros are scooping up real estate investment trusts, home-builder stocks and even a physical house here and there. Economists point to several indicators that suggest their confidence could be well-placed. Mortgage delinquency rates fell to 2008 levels in the first quarter, housing starts are improving, and bidding wars are breaking out in certain cities. “The housing crash is over,” says Mark Zandi, chief economist at Moodys.com.