The Housing Market: Again a Place for Investment

Steady growth in the housing market is convincing investors that now is the time to invest. Home-listing prices were up 5.1% in December from the previous year and have been steadily increasing over the last few months. However, why does it make sense to invest in the market that singlehandedly led to the global recession in the late 2000s?

Mortgage backed securities, the financial instrument that contributed greatly to the recession, will see greater investment if the housing market continues to strengthen. However, it is safe to say that things would be different this time around, at least we hope so. Credit rating industries such as Moody's and S & P will hopefully ask for full disclosure of the lendee's information when rating the risk of all loans. What will not be different is that the success of the market is very dependent on home prices continuing to rise. If the price of a person's home decreases significantly to a value worth much less than the mortgage, there is nothing stopping that person from simply walking away, causing investors to suffer losses.

Some firms are trying to invest in the housing market from different angles. The safest way to invest in this market is to buy the physical homes, an approach that KKR, Colony Capital, and Blackstone are taking. Buying, renovating, and renting homes is the strategy. 20% of homes sold in October were sold to "investors," people looking to make money off the homes and not live in them themselves. There is also another way to invest in the housing market: investing in companies that have to do with homes. Buying shares in Home Depot, Lowe's, and similar companies may prove to be a lucrative investment as these companies go hand-in-hand with the housing market.

It appears that the relationship between Wall Street and housing may not be as volatile as last time around. Last time some made millions by shorting the market and betting against it, this time some will see a modest return by betting on it.

Works Cited"The Big Long." The Economist. N.p., 1 Dec. 2012. Web. .Chen, Stefanos. "Report: Home Prices Poised for Growth in 2013." The Wall Street Journal. N.p., 3 Jan. 2013. Web. .