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Housing Recovery Continues to Move In

Real estate is back, and investors better take notice — if they haven’t already.

On average, U.S. home prices jumped 12.2% in May compared to 3.1% in May last year. That jump is the most in seven years, according to real estate data from CoreLogic that was released this week.

The details were compelling — improvement in 48 states (only Delaware and Alabama lagged), and 97 out of the 100 largest cities tracked reported price gains.

Nevada saw the biggest gains — noteworthy since Las Vegas was ground zero for the housing meltdown. Other hard-hit markets like California and Arizona were close behind, proving that other down-and-out markets continue on the road to recovery.

This mirrors the S&P/Case-Shiller numbers from April that showed a 12% increase year-over-year in prices.

Adding to the consensus: Research firm Movoto just posted its July State of the Real Estate Market report, and 20 major metro areas noted growth of more than 10% year-over-year. That included a staggering 68.1% jump in Sacramento and a 44.8% lap in Phoenix. Only New Orleans and Chicago saw prices roll back, with 2.2% and 3.2% declines, respectively.

“Across the cities we track, our index showed the list price per square foot increased for 36 of the 38 cities,” Movoto reported. “The list price per square foot increased by 15%, rising from $158 in June 2012 to $181 by the end of June 2013.”

Why the increase in prices? As it turns out, there’s a dearth of home inventory in all these markets, too.

“On a year-over-year basis, 32 of the 38 cities we track saw a drop in total inventory,” the research firm wrote. “The total inventory across the cities we track is down by 20.5% over the same time last year.”

Twenty-two of the 38 markets tracked saw a 20% drop or more in inventories.

Given all this data, it is very hard to dispute the housing recovery. But don’t go out and start buying housing stocks just yet.

The SPDR S&P Homebuilders ETF (XHB) has mildly underperformed the market year-to-date in 2013, thanks in part to a rip-roaring run late last year that seems to have baked in most of the optimism. And major builder Toll Brothers (TOL) is sitting on a loss since Jan. 1 and PulteGroup (PHM) is up just 5% vs. 13% gains for the S&P 500 in the same period.

However, secondary housing plays like Bed Bath and Beyond (BBBY) have done very well. The home décor retailer has tacked on 28% year-to-date — presumably because folks are moving into new homes or dressing up old ones to sell. Home Depot (HD) has also outperformed nicely with 25% gains YTD.

Past performance is no guarantee of future returns, of course. But clearly the recovery in real estate has provided some big opportunities for those who have been paying attention.

Continued recovery in housing and home prices should continue to provide a tailwind to other stocks in the months ahead.

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Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP

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