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Shares of American Campus Communities, Inc. (ACC) and Education Realty Trust, Inc. (EDR) surged higher after the American Campus unveiled higher earnings, while bullish home sales data also hit the market signaling a possible turnaround.

American Campus Communities (NYSE: ACC) reported a 41.35% increase in its operating income and an 87.6% increase in its revenues for the full-year 2008. However, net income dropped sharply on higher amortized deferred financing costs related to its recent acquisition of GMH’s student housing business. Regardless, investors applauded the acquisition as a means of growth over the long-term, and shares rallied as a result.

The housing market also showed signs of recovery after pending home sales made a surprise 3.2% jump in March, and buyers defied expectations and took advantage of a large government credit. The consensus forecast of industry experts polled by Briefing.com predicted that the index would remain even for the month. The forward indicator of home sales has many investors speculating that the housing turnaround may be gaining traction.

A turnaround in the housing market would be a positive signal for all companies, including niche student housing providers. While there is no direct benefit to these companies, there are indirect benefits that are being closely watched. American Campus Communities and Education Realty Trust (NYSE: EDR) both surged higher on the day as investors hoped that asset valuations and financing conditions would improve in the event of a sustainable recovery.

In the end, student housing providers continue to have an edge over traditional real estate investment trusts. More students are attending schools and looking for housing, which makes renting these properties a lot easier than renting traditional apartments. Meanwhile, any improvement in the underlying housing market could improve asset valuations and give the companies greater access to financing down the road to grow.

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