Don't believe housing's permabears
A housing recovery is slowly taking shape, despite the many doubters.
A housing recovery is slowly taking shape, despite the many doubters.
No one in their right mind would refer to the current trend in housing as a rip-snorting bull market - but to dismiss the amelioration out of misplaced loyalty to a long-held pessimistic outlook would be a mistake.
As a refresher - the Fed is making it so the banks can keep millions of foreclosed properties on their books forever and never mark them down.聽 Elsewhere, there's also been some accounting changes that allow the banks to mark-to-make-believe to some extent.聽 I'm not asking you like or approve of these things, just to understand that they are happening.聽 They put the banks in a position of flexibility in terms of pricing and the timing of when they sell them off.
There are buyers for foreclosed homes - Wall Street is raising billions of dollars in new vehicles to scoop them up.聽 Hedge funds are buying them up as well.聽 This will intensify as it's a trade with homerun potential over the next decade and Big Money needs a homerun right about now.
The typical housing permabear (yes, there is a such thing now) will frequently cite the "shadow inventory" of foreclosures that will swamp the market when it comes up for sale.聽 They don't get it - it won't be coming to market at all.聽 At least not until such time as the banks want to offer it.聽 And now there are hungry buyers, negating that aforementioned stale thesis even further.
And of course, this combined with the secret ingredient (T.I.M.E.) is leading to some interesting signs of improvement in the housing market...
From WSJ's CIO Report:
CNNMoney points out another positive sign: Last month鈥檚 jobs report showed that homebuilders added 5,800 workers in July 鈥� about the same number they were adding during the real estate boom of 2005 and 2006.
Bill McBride also has even more notable data on the continuing improvement in the housing market and its fledgling impact on the rest of the economy...
From Calculated Risk:
I am of the belief that the one thing that can stave off a new recession is a steadily improving home market.聽 The wealth effect from housing is 10X vs whatever the hell Bernanke is trying to accomplish by pumping up the stock market.聽 Let's hope the trend continues.
Sources:
The Morning Download (CIO Report)
The Economic Impact of a Slight Increase in House Prices (Calculated Risk)