November housing starts beat expectations by almost 8% (685K vs. 635K). Not only that, but they are up 30% so far this year, and up 43% from their all-time low, April 2009. They say that housing cycles typically last 5 years, but this one has been the worst ever and has lasted almost 6 years. Thus, there is every reason to believe that we have indeed seen the bottom in housing and that a recovery is now underway. They also say that an upturn in residential construction is an essential part of a larger economic recovery; if so, then maybe the recovery skeptics will finally have to change their tune.
Unvarnished good news, and the harbinger of much more good news to come. The collapse in housing starts has allowed a huge reduction in the excess inventory of homes, bringing supply back in line with demand. As the economy slowly improves, new family formations advance, and more people working want new and better homes, the nation could find itself with a shortage of housing before too long and much higher prices and interest rates to boot. This is a recovery that can feed on itself, and its still in its infancy.
This index of homebuilders' stocks has almost doubled from its late-2008 lows, and has the potential to double and even triple from here if housing starts regain their former altitude.
I doubt that US residential housing will recover before 2035...
ReplyDeleteIn 2008, I predicted a housing recovery around 2012 on the following basis - interest rates would be low due to gov't intervention setting up a bond bubble, where investors can only lose money. Stocks will have lost the majority of the retail base due to the quick succession of scandals and crises (Enron, WorldCom, subprime, MF Global, etc.) and will not achieve historical multiples to earnings for years to come. The only remaining alternative investment for the average investor is real estate and Americans' love affair with property will be rekindled. Recovery in 2012, solid returns through 2015...
ReplyDeletePS: Today's sharp jump in the stocks seems to also reflect the market's support for House Republicans who have apparently successfully blocked passage of Social Security tax reductions, extending unemployment benefits, and extending delays in reducing Medicare payouts to physicians -- the markets seem to love the news, which is interesting for sure!
ReplyDeleteDonny Baseball may be right and Scott Grannis is a keen observer. Hope this works as indicated.
ReplyDeleteOne thing is for sure: It is more affordable to buy a home in the USA than ever. And (for investors) if you buy real estate now, you are certainly not buying at the top.
And a huge global pool of money is seeking placement---there more capital to be invested than good investment opportunities. USA real estate may come back into favor.
Remember---buy when everyone is scared. Sell when they are dancing naked in the streets.
They ain't dancing yet but with kick they will be. Maybe the Fed will put on something with a beat.
Real estate can be purchased at deep discounts today -- those with cash are loving the buying opportunities -- dividend-paying stocks (the good stuff) are also cheap these days -- now is a buying opportunity for those with cash either from earnings, wages, or savings -- equities of all kinds have never been more attractive -- that includes not only real estate and stocks, but the best higher degrees, collectibles, and anything of beauty -- life is grand right now -- regretfully, the expanding Main Street depression is likely to prove devasting for those without equities, jobs, or skills, or who rely upon the government for wages or entitlements -- restructuring away from the public sector is about to pickup steam!
ReplyDeleteThe rise in housing has been strictly in multi family units or apartment rentals...
ReplyDeleteIf those who think the Gyro crisis is over, well by all means, invest accordingly..
What is currently happening to the Euro, is that it is a non-working fiat script and there is a very strong likelihood it will fail; and doing so will bring much more pain and a recession to Euroland and its unfortunate inhabitants...
As Mish so correctly stated, the Euro was more of a political consideration, than an economic one..
What about the "shadow inventory" of homes which is said to exist? Is it real or another fear factor being created by the bears? Would really appreciate Scott's views on this since he is making the case that a housung recovery is underway. I tend to agree with him but am concerned about this so called inventory overhang causing a surprising setback.
ReplyDeleteKenneth, Dr McKibbins, is correct about the shambles of the housing industry...
ReplyDeleteAre things improving as, Mr Grannis has stated, yes marginally so..
Donny, the final massive mortgage reset peaked this summer and we should see the market stabilize, however, I would be loathe to call this a recovery..
I am sure that zero down mortgages will once again be approved, to aid the housing industry; as well as the Community Investment Act, broadened to include every last parcel in America..
Hear some sobering stats:
http://dailycapitalist.com/2011/12/20/real-estate-catch-a-falling-knife/#more-16833