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A 'Backdoor' Way to Play the Booming Housing Market

Jim Woods

The housing market is hot, and so are the stocks tied to its fortunes. In 2012, homebuilder stocks were all the rage, as evidenced by the 60%-plus rise in the SPDR Homebuilder (XHB), an exchange-traded fund (ETF) which holds the biggest homebuilders in the nation, such as DR Horton (DHI), KB Home (KBH) and PulteGroup (PHM). So far this year, XHB is up over 9.7%, which is slightly better than the 8.3% rally we've seen in the S&P 500 Index.

This year, there's a different kind of housing stock getting all of the love from profit-seeking traders. These stocks don't build homes, nor do they sell supplies to renovate your existing home the way retailers Home Depot (HD) and Lowe's (LOW) do.

These stocks are all about information and mouse clicks, and they just may be the best stocks to play the strong housing rebound.

Just how strong is that rebound? Well, consider the recently released statistics from the Mortgage Bankers Association on the increase in new mortgage applications. The industry group reported that mortgage applications rose a seasonally adjusted 14.8% for the week ending March 1, a monster move that bodes well for continued upside in the housing market.

So, which two stocks are seeing the biggest boost in the housing space, and which are likely to continue to be great trading vehicles going forward? Here are my favorites...

Trulia (TRLA)

This company provides housing information to prospective homebuyers via the Internet and through what has proven to be a huge growth market, its mobile-applications. Trulia's data-rich website enables real estate agents to list homes, and perhaps more importantly, it helps homebuyers find the home that fits their criteria. Data such as location, price, features, etc. can be found with just a couple of mouse clicks.

As the housing market continues to recover, stocks like Trulia are likely to keep seeing big gains. So far this year, TRLA shares have spiked an incredible 73%! I suspect that these gains are just the beginning for TRLA.

Recommended Trade Setup:

-- Buy TRLA at the market
-- Set initial stop-loss at $27.45
-- Set initial price target at $37.30, for a potential 25% gain over the next three months

Zillow (NASDAQ:Z)

Another fantastic company facilitating and providing information to homebuyers, home sellers and real estate professionals is Zillow. Like Trulia, the company's website and mobile applications provide all kinds of data on the housing sector. Homes for sale, prices, features, homes recently sold, and a host of other important information can be gleaned at Zillow. Consumers also can find out about mortgage rates, connect with lenders, and find out all sorts of interesting local information.

Zillow shares also have seen a massive spike so far in 2013, with the stock soaring 77% in the young year. Like TRLA, I think Z has a lot more upside for traders looking to ride the next wave of the housing recovery.


Recommended Trade Setup:

-- Buy Z at the market
-- Set initial stop-loss at $45.40 
-- Set initial price target at $61.68, for a potential 25% gain over the next three months

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