The real estate sector has been considered off-limits to most investors during the last year. But according to recent data and indicators, REITs are worth a look.

Now that winter is over and it is officially lawn-mowing season here in the Northeast, it is much easier to determine which homes are in foreclosure.

On my way home from the office, I pass at least half a dozen homes with grass so high and so out of control it is going to take a hay baler to get things back to normal. On their front door is a little sticker explaining the situation.

But if today’s economic data is any indication, it may not be much longer until a new set of mortgage-paying owners are zig-zagging their shiny, new lawn mowers across the yard.

According to the National Association of Realtors’ pending home sales index, which jumped an unexpected 6.7% to a reading of 90.3 in April, the pre-owned home market may be finding a bottom. The latest reading shows the strongest surge in over eight years.

This is good news for investors wanting to take advantage of the growing profit opportunity.

REITs: Investing in the “danger” zone

For some of the potential contained in the REIT market, all we have to do is look at the overall market. In March, investors oversold equities in a major way. Since the lows, the major indices are up by 36%, with many stakes doubling or even tripling in value.

Looking at the REIT sector, the same sort of earning potential is on its way. There is no doubt the real estate industry has been oversold. Prices may temporarily take a small dip, but over the long-term, today’s prices must rise.

In fact, real estate is one of the few long-term investments worth making today.

As the pendulum begins to make its swing in the opposite direction, there are several investments worth taking a look at, but I will give you two freebies to get your search started.

First Potomac Reality (NYSE:FPO) offers exposure to the Washington D.C. and Northern Virginia area, one of the strongest and least-risky growth markets in the country. If you do not mind a lack of diversity and a slightly smaller-than-average profit potential (the D.C. market has remained fairly strong), this REIT is a good choice.

For more diversity and a larger exposure to risk (and therefore profits), take a look at Simon Property Group (NYSE:SPG). As a mall owner with properties across the country, it provides exposure to several major markets, but limits investors to the risky retail industry.

If you have followed the recent demise of General Growth Properties, you have probably heard of Simon, a chief competitor. As long as the retail industry does not make another backslide, the REIT is able to claim it has made it through the worst of the storm.

Wall Street has never been very good at predicting exact bottoms. As investors analyze the latest data, there will be opportunities to rack in some short-term gains. But in the real-estate sector, long-term is the only way to go.

Buy shares now and sell them the next time you say, “They want how much for that property?”
Source: Take Advantage of The ‘Tall-Grass’ Indicator