U.S. home prices, as measured by the S&P/Case-Shiller 20-City Composite Home Price Index, increased 1.8% on a sequential basis from June to July and 12.4% year-over-year. The top 5 cities in terms of one-year growth: Las Vegas, San Francisco, Los Angeles, San Diego and Phoenix. The average price in those cities was 22.5% — almost double the top 20.
There are two ways to look at this. Either you see some sort of apocalyptic housing bubble or an opportunity to invest in some of the hottest housing markets and homebuilders in the country. I see the latter. And before you get all hot and bothered about a housing bubble, just remember that current housing prices are still 22% below their peak in July 2006 — when the prime rate was almost 8%.
I’m going where the growth is. To do that, I’ve got to find homebuilders with strong businesses in all five of these markets. Here’s a look at my best housing bets.