Housing’s Humpty Dumpty moment
(James Saft is a Reuters columnist. The opinions expressed are his own)
All the King’s horses and all the King’s men have been busy propping up the housing market but sometime this year, perhaps soon, it will face a Humpty Dumpty moment.
While it gets a lot less attention than the banking bailout, the official forces targeted at supporting house prices are truly vast; a generous tax break for buyers and a mortgage market that has essentially been nationalized.
That’s bought a recovery of sorts — Standard & Poor’s/Case-Shiller home-price index released on Tuesday showed that in 20 major cities home prices rose 0.2 percent on a seasonally adjusted basis between October and November, despite a national unemployment rate of 10 percent and a slow-motion cascade of foreclosures.
But like the egg in the nursery rhyme, which once broken cannot be reassembled, housing still faces some pretty horrendous fundamentals. It needs a strong recovery in employment to arrive before political consensus for housing support cools. (Full disclosure: I just bought a house, but hey, everybody’s got to live somewhere).
Already there are signs that housing may be faltering. Existing home sales declined sharply in December, though this was partly because many rushed to close purchases before a now extended deadline for tax rebates expired on Dec. 1.
Housing starts too fell in the month and, significantly, the Federal Reserve removed language pointing to improvement in housing from its statement accompanying its decision to keep interest rates at record lows.
An emerging opportunity in U.S. housing
– James Saft is a Reuters columnist. The opinions expressed are his own –
Deep breath. Ok, here goes: For the first time in a very long time U.S. housing might actually be a reasonable buy on a five-year view.
As a long-time housing bear and someone who believes there is still considerable pain to come in the U.S. economy and banking system that is quite a hard thing to say.
Well James, you’re right about not calling a bottom. Even those adverse to market-timing knows one cannot time the bottom this year. Therefore why buy now? Knowing full well the money will be locked up for 5 years without income, subject to further downside risks. It cannot even be used to store value. Surely there are other asset class that will perform better than buying US housing now. Unless, of course, one buys on emotion – that most beautiful dream house now on the market for a killer price. 
from Ask...:
Out with the old year, in with the new
Despite the incessant drumbeat of poor economic data -- consumer confidence fell to a record low in December and the price of single-family homes plunged in October -- the majority of Americans are optimistic about what is in store in 2009.
The Marist College canvassed 1,003 Americans about their expectations for 2009 on December 9 and 10 -- days after the National Bureau of Economic Research confirmed the United States had been mired in a recession since December 2007.
Expectations for a brighter future were higher among younger generations with 64 percent of those under 45 having an optimistic view compared with 52 percent for those 45 or older.
Based on last year's results, those who aim to improve their lives in 2009 will have at least partial success. In 2008, 60 percent kept their self-made promises for at least part of the year.
Are you optimistic about 2009? What resolutions will you make to improve your life in 2009?
Pssst: INFRASTRUCTURE. It was ‘plastic’ back in the Graduate movie days. Today, we’ve been given ample warning that tons of money will be spent on infrastructure. I think 2009 will look great for all investors buying steel, cement, copper, construction equipment and other basic materials.
Fact is, people who REALLY run America are great con artists and globaliztion is their tool for transfering wealth from the rest of the world to the USA. Surely you’ve heard of the old scam of inflating house values, getting a big fat mortgage based on the inflated value, using the money on yourself and then letting the lender get stuck with the loss. Who do you think is buying up the bonds issued by fannie mae and freddie mac and FHA??? It’s European pension plans, the governments of Japan and China as well as many individuals who invest in Bond mutual funds; all of that foreign money pours into the USA into the hands of the americans who take out the mortgages. They then spend the money within the USA on crap and pay taxes spent on weapons all of which funnel money to the guys who are facilitating the inflated house values. It’s really quite obvious once you think about it a little bit.