According to March data released today, U.S. housing starts have risen 30% from their all-time low (April '09). In addition, building permits increased 38% over the same period. And not surprisingly, the Bloomberg index of home builders' stocks bottomed last July and has since risen over 50%. And as I've pointed out before, the prices of home equity-backed securities are rising sharply. If this doesn't add up to a clear picture of a bottoming in the residential construction market, I don't know what would.
To be sure, this "bottom" has taken almost a year to form, which makes it the longest-drawn-out recession bottom since data began to be recorded in 1968. Also, housing starts in the winter months are full of seasonal adjustment factors which may or may not accurately reflect underlying activity. But an increase of 30% in just under a year is pretty impressive nonetheless, and hard to chalk up to seasonal or weather-related vagaries.
With most signs pointing to an end to the worst housing recession in modern history and a clear beginning to a housing recovery, the widespread angst over the homes remaining to be foreclosed and auctioned off seems overdone. The recovery is for real, thank goodness.
The foreclosure auctions are getting more crowded, homes are being bid up higher. It's getting tougher to sneak out a homerun deal.
ReplyDeleteFigs out in LA Times today an higher SoCal home sales and prices. A little noise in the data--better homes are selling, thus pulling up reported median prices--but overall, very good.
ReplyDeleteI suspect with low inflation embedded into our economy now, we have a secular bull market ahead of us for property and equities.
That near-deflation was purchased at horrific cost--a near-death experience on property and stock markets. Joblessness too.
But, at the same time, it sets up for a long period of low-inflation growth. I hope.
Me too, Benj, me too.
ReplyDeleteScott,
ReplyDeleteWhat's your view on the Goldman mess?
I don't have any original insights into the Goldman thing. But it seems to me that the government is very eager to blame the banks and Wall Street firms for taking advantage of a very distorted and disaster-prone situation created almost exclusively by Congress (e.g., Freddie, Fannie, the CRA, Congressional mandates to increase lending, deductibility of home mortgages, non-recourse loans).
ReplyDeleteOver on SA I counted 23 negative comments vs 3 positive on this post. Yet IYR (real estate ETF) has more than doubled in the past year. The bozos commenting there are one of the better contrary indicators I have found.
ReplyDeleteBuy, Mortimer.
Nothing moves up in a straight line forever. Corrections (honorable profit taking) are normal and healthy. IMO the SEC accusations gave market players an excuse to sell. Scott's charts are telling a tale of a sustained recovery that will last years. The banks will prosper during those many months of expansion. Wait for the sellers to finish ( maybe a two or three day pause in the decline) and those with a longer term investment horizon can cherry pick the better quality names at lower prices.
ReplyDeleteDisclosure: I am long JPM,BAC,C,XLF, and WFC I will be nibbling at these on weakness. And I am a long term investor.
Bill,
ReplyDeleteI do not know if this is all of it or not but Cramer has a take on the Goldman stuff you may want to read. Just more perspective, and I'm sure more will come out as we go along.
http://www.cnbc.com/id36601416