Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

U.S. Housing Market Outlook 2013

Housing-Market / US Housing Nov 22, 2012 - 03:51 AM GMT

By: InvestmentContrarian

Housing-Market

Sasha Cekerevac write: One of the most often talked about parts of the economy is the real estate market sector. Because real estate is such a large and important part of the economy, naturally, many eyes are focused on whether or not this market sector can and will rebound from its deep decline.


While we have certainly seen a strong bounce off the bottom, there are still many concerns for the future of both the real estate market sector and housing stocks, specifically. Investors in housing stocks are definitely ahead of the curve, as many housing stocks have increased substantially. With gains in excess of 100%, the question on many people’s minds is: will the real estate market sector continue its upward trajectory, or are housing stocks teetering on the edge of a massive decline?

The Department of Commerce just released the number of housing starts for October. As I expected, housing starts exceeded estimates, coming in at an annual rate of 894,000, up 3.6%. This is the fastest annual rate since July 2008. Many estimates taken by Bloomberg in a survey are still far too low, coming in at 780,000–873,000. (Source: “Housing Starts in U.S. Increase to Four-Year High,” Bloomberg, November 20, 2012.)

The reason why publicly traded housing stocks are doing so well and driving housing starts is that they are able to take advantage of extremely cheap financing. Essentially, private homebuilders are not able to borrow funds as cheaply as publicly traded housing stocks. Because investors are looking for places to park their money due to the low-interest-rate environment, this is giving housing stocks so much excess funding that they’re running out of land to build on.

Anytime a market sector has excess financing capacity (lots of money, but no place to put it), the costs for the borrower drop precipitously. So, now we’re in a situation where homebuyers have historically low mortgage rates and housing stocks can buy cheap land and make large profits on new homes by borrowing for essentially nothing. Naturally, home starts are going to exceed expectations. If you had a business where demand was strong and you had free money to expand, wouldn’t you do so?

But why is demand strong in a weak economy? This is another interesting point that I believe is driven by the publicly traded housing stocks. Many people who have been involved in a foreclosure or just have bad credit history are having difficulty obtaining a mortgage from traditional lenders, such as the large banks. The banking market sector, in general, does not want to load up in the housing industry so soon after the crash. However, I believe it’s much easier to obtain financing if one were to buy a new home from the publicly traded housing stocks. They would be able to help arrange financing, even if it was at slightly higher rates. After all, if one was to pay $1,400 a month for rent or $1,000 per month for a mortgage, it would make sense to buy. This is yet another positive factor for publicly traded housing stocks that have access to cheap investment capital.

However, because of the large move up in housing stocks this past year, I think most of the easy money has been made. In fact, many of the CEOs for the top housing stocks are cautious regarding their market sector.

Recent comments by the CEO of D.R. Horton, Inc. (NYSE/DHI), Donald Tomnitz, can illuminate a lot. Tomnitz stated in a conference call that he was quite concerned that the lack of jobs might lead to lower home sales next year. D.R. Horton is, by volume, the largest homebuilder in America. One of the most sobering moments was when Tomnitz stated, “I also see the fact that there are potential layoffs in a number of industries, especially the defense industry.” (Source: “D.R. Horton Falls as CEO Cautions on Job Growth Next Year,” Bloomberg, November 12, 2012.)

While housing stocks have done well, the overall real estate market sector is still susceptible to a downturn. Even if we don’t get a decline in home prices, for the current housing stocks to remain at their elevated levels, they would need to see the real estate market sector continue its extremely strong trajectory. I think too many of these housing stocks are priced to perfection.

I also think people need to realize that the real estate market sector won’t exceed the recent peaks in price. The boom in the real estate market sector was created by artificially cheap money. Unfortunately, the recent moves by the Federal Reserve might actually be beginning to stimulate yet another boom fueled by cheap money. I believe that people entering the real estate market sector should look at the cost of renting versus buying and expect limited price appreciation. I believe we’re getting back to a more traditional structure for the housing market sector, in which one buys for security and not speculation.

Source: http://www.investmentcontrarians.com/real-estate/what-2013-will-look-like-for-the-housing-market/1028/

By Sasha Cekerevac, BA
www.investmentcontrarians.com

Investment Contrarians is our daily financial e-letter dedicated to helping investors make money by going against the “herd mentality.”

Copyright © 2012 Investment Contrarians- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules