I’ve been shouting from the heavens that people need to get out of their positions in commercial real estate (CRE), especially REITs that hold a lot of commercial mortgage-backed securities.
Those who’ve been listening to me have been asking me a natural question in response: “Okay, so, what do I do with all that capital now?”
One answer is to figure out where the hot trends in real estate are right now and go with them. And the sector that’s on fire right now is residential real estate, especially homebuilders.
The reason for that boils down to simple supply and demand economics. The rate of growth in homes available for sale turned negative back in April, and home sales are falling like a rocket – the fastest decline, in fact, since the Great Financial Crisis of 2008. And the total inventory of homes for sale is the lowest it’s been in over a decade, thanks to homeowners staying put rather than selling their current home and taking on another mortgage when interest rates are so high.
So if you’re looking to buy a home right now, pickings are slim, which is driving up demand for new homes. That’s where the builders come in. And several of them across all business lines – single-family, detached, townhomes and condos, etc. – are having a field day as a result.
That’s why I wanted to make sure you knew what the best names were right now, so you can take that capital you’ve recovered from getting out of commercial real estate and put it into something that’s going to make some money.
For my recommendations, check out this week’s Buy This, Not That video:
— Shah Gilani
Source: Total Wealth