Four Housing Stock Picks for A Weak Market

He said in no case was the price of the home increased to cover the expense of the giveaway. He stressed that each homeowner had already set their price and that Peters' firm had done their own Comparable Market Analysis (CMA) to make sure the price was realistic. Once the price was established, the client was then asked what amount would they be willing to contribute to that help sell the home. Peters pointed out that these types of "incentives" (such as paying for closing costs or upgrades) are commonplace, but in today's luxury home market, sellers need to do more. He's right.

Being curious, I asked, "What happens if the buyer doesn't want the car?" Peters told me that they would give the buyer cash back at closing equal to the purchase price of the vehicle. Hey, if it works, I'm all for it.

I asked him if he has seen any results from his strategy and his answer was that his leads have "skyrocketed." I hope so. But as we all know, it is a long way from the lip to the pen.

Return of Luxury Market Will Take Years: So Where's The Opportunity?

According to Jace Boozer, a sales agent for the Beach Company in Charleston, South Carolina, sales for first time and move-up homes are actually moving quite well. According to Boozer, "this is mainly due to available credit on loans less than the FHA $417,000 limit." This assumption is backed up by the May 18th NAHB's Housing Opportunity Index, or HOI which showed nationwide housing affordability jumped for the January-March period to its highest on record. According to NAHB, the HOI showed 72.5% of all new and existing homes sold in the first quarter of 2009 were affordable to families earning the national median income of $64,000, up from 62.4% during the previous quarter. The 72.5% marked the highest level since records began 18 years ago. Conversely, Mr. Boozer believes the higher end market's rebound is a long ways off.

I believe that this provides an opportunity for investors. If you are willing to hold out for a few years and be a disciplined buyer (buy on the dips), looking at stocks of home builders active in niches in the entry-level and first-time move-up home buyer markets. Two national powerhouse homebuilders that I think deserve a look are Pulte Homes (PHM Quote)(PHM) and Lennar(LEN Quote). They both still have access to financing and will survive the downturn. I would wait until a pull back and buy Pulte at under $10 and Lennar at under $8.50.