3 Stocks for a Housing Bottom: Z, SPF, DHI

The US Government filed a $25 billion settlement with the five largest mortgage lenders today. Could this be the bottom for the housing market?

If you think so, we like 3 these Housing related stocks: Zillow (Z), Standard Pacific (SPF), and D.R. Horton (DHI).
Here's the deal: The 5 largest lenders in America will be writing down their outstanding loan balances to what their property is worth. This means that consumers who have been sitting tight, waiting for their home prices to come back above water just got instant gratification. It's not going to happen overnight, but we think that this should lead to more Americans buying homes.

Now if only you could get your money back when a stock goes underwater, am I right?

The banks will also pay $5 billion in cash to the federal and state governments. About a third of that money will go into a fund to be used for sending $2,000 checks to about 750,000 Americans who were improperly foreclosed upon from 2008 through 2011. This should be a pretty good stimulus to the economy to boot.

Now back to the stocks. Zillow is definitely looking the sexiest of the bunch here. Once housing picks up, you can bet Zillow will start blowing out earnings estimates to the upside.

Standard Pacific (SPF) D.R. Horton (DHI) are the home builders that we like - even though they have both posted some decent gains this year (50% and 25% respectively) we think they have more room to run.

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