Economic expansion in the southwest region of the U.S. is expected to continue its recently observed growth throughout the next decade, allowing a great investment opportunity. Economists conclude the key driving factor in this growth is the prevalence of new jobs. Amongst the top ten states with highest amounts of net jobs include: California, Washington, Arizona, New Mexico, and Nevada. California, although it experiences +9% unemployment, has a net job growth of 4% this year and is expected to increase by another 8% next year. In addition, studies have proven that salaries in the New York City Region are recently falling short of those similar salaries offered in San Francisco. We can conclude that indeed wealth is moving westward into these states, but how are we going to capture it?
Our first suggestion is Taylor Morris (TMHC) which has recently been laying its foundation in Arizona as a home developer that we should keep our eyes on. In a recent post, we discussed the opportunities in the real estate market in Arizona but this suggestion offers a new point-of-contact for investors to harness the boom. Taylor Morris is a recent IPO and has been offering award-winning eco-friendly home designs that have stunned the Jones next door. We expect to see this company experience growth in the next few quarters and we should watch for obvious indicators for valuation: P/E ratio being most important.
TRI Pointe Homes (TPH) is a different option for investing in home builders, but this company focuses its target market strictly in California. This company is another recent IPO venture that went public at the beginning of the year. TRI Pointe Homes offer a similar product to Taylor Morris in its TRI-e3 design homes. These homes are fabricated with efficient sealants and make an attractive buy for those who can afford them. Similarly, we should look for increased operating revenues and decreased selling/admin expenses.
Capitalizing on the real estate boom in the SW is important and for all of those investors who are emotionally straying away from real estate since the last boom, know this: play it smart, don't play it based on emotion. Let the statistics help: the Case-Shiller index for the 20 biggest cities rose by 12% year on year this May, the largest rise since March 2006. Yes, the sun is shining, so let's follow it!
http://www.marketwatch.com/story/americas-10-hottest-housing-markets-2013-08-14?dist=beforebell
-Renner
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