There has recently been good news on the U.S. housing front: Single-family home sales jumped 7.2% in July from June. That’s the biggest month-over-month rise that the country has seen in 10 years. Sales had been rising for the previous three months, but July’s result was much higher than expected.

Now, investors on both sides of the border are wondering how best to invest in a U.S. housing rebound. Some are looking to U.S. large cap stocks related to the housing sector.

True Blue Chips pay off Learn everything you need to know in 'The Best Blue Chips for Canadian Investors' for FREE from The Successful Investor. Canadian Blue Chip Stocks: Bank of Nova Scotia Stock, CP Rail Stock, CAE Inc. Stock and more.  I consent to receiving information from The Successful Investor via email. I understand I can unsubscribe from these updates at any time.

Bargains, tax credit push sales higher

The 7.2% rise in sales is encouraging, but the higher results are partly due to buyers rushing to lock in bargains on foreclosed homes, and first-time buyers taking advantage of a government tax credit that’s set to expire. As well, home prices are still falling in many parts of the country, despite the higher sales. That’s making housing more affordable.

Two large cap stocks with direct connections to the housing market

The U.S. housing recovery will need a sustained economic recovery to continue, but such a rebound would be good news for two large cap stocks we cover in our Wall Street Stock Forecaster newsletter.

Sherwin Williams (symbol SHW on New York) is North America’s largest paint producer. The company gets 60% of its sales from its retail paint stores. It’s one of the U.S. large cap stocks that has suffered during the recession, as consumers put off home-renovation projects and housing markets fell. But it could profit from a rebounding U.S. housing market, particularly if activity is sustained once incentives, such as first-time homebuyer tax credits, expire.

The Stanley Works (symbol SWK on New York) makes hand and power tools for consumers and professionals. As such, it’s directly affected by the health of the housing market. In its latest quarter, it sold 28% fewer tools to consumers compared to a year earlier. However, Stanley has been cutting costs to deal with the slowdown, and is taking steps to diversify its operations. Like Sherwin, Stanley stands to gain if the housing rebound continues.

We’ll continue to keep a close eye on both of these housing-related companies and update our buy/sell/hold advice as necessary in our Wall Street Stock Forecaster newsletter and our weekly email and telephone Hotlines. Click here to learn more about how you can subscribe for one full year with no risk and no commitment.