Best of the Week
Most Popular
1.Putin’s World: Why Russia’s Showdown with the West Will Worsen - John_Mauldin
2. Stocks Bull Market Grinds Bears into Dust, Is Santa Rally Sustainable? - Nadeem_Walayat
3. Gold and Silver 2015 Trend Forecasts, Prices to Go BOOM - Austin_Galt
4.Gold Price Golden Bottom? - Toby_Connor
5.Gold Price and Miners Soar on Huge Volume - P_Radomski_CFA
6.Stock Market and the Jaws of Life or Death? - Rambus_Chartology
7.Gold Price 2015 - EWI
8.Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - Nadeem_Walayat
9.Gold, Silver, Crude and S&P Ending Wedge Patterns - DeviantInvestor
10.Is the Gold And Silver Golden Rule Broken? - Michael_Noonan
Last 5 days
Ruble Takedown Exposes Cracks in Putin’s Defense - 20th Dec 14
Oil Drilling Our Way Into Oblivion - 20th Dec 14
Stocks Bull Market Resumes - 20th Dec 14
Gold And Silver Nothing Is Ever As It Seems And No Respite For PMs - 20th Dec 14
What Are Technical Indicators Saying About the Stock Market? - 20th Dec 14
Here’s How You Can Still Make 27% With Apple Even if You Buy Now - 20th Dec 14
Gold Stocks to Shine in 2015 - 19th Dec 14
Why Alibaba Stock Shares Are a Screaming Buy - 19th Dec 14
China, Dollar, Japan, Europe Burning Questions for 2015 - 19th Dec 14
U.S. Economy is in a Sweet Spot! - 19th Dec 14
US Dollar and the Gold Fairy Tale - 19th Dec 14
Show Me The Money (Flow)! Tracking Money-Flow Through Value Shifts In Stock Markets - 19th Dec 14
The Commodities Market Is Not Dying, It’s Just Hibernating - 19th Dec 14
The Price Of Gold And The Art Of War - 18th Dec 14
Euro Succumbs to ECB QE Expectations and FOMC - 18th Dec 14
John Williams: A Downhill Run for the U.S. Dollar in 2015 - 18th Dec 14
Outrage at Taliban Islamic Fundamentalists Massacre of 132 Pakistani School Children in the Name of God - 18th Dec 14
How Inflation Changes Retirement Benefit Choices - 17th Dec 14
The Real Reason It's Tough to Beat the Stock Market - 17th Dec 14
Russian Currency Crisis and Debt Defaults Could Create Contagion in West - 17th Dec 14
How to Profit From Russia's Stock Market Crash - 17th Dec 14
Russia Crisis - If You Put Your Money in the Bank Will You Get it Back? - 17th Dec 14
Crude Oil Price Crash, U.S. Employment and Economic Growth - 17th Dec 14
Opposing Forces At Play In Gold and Silver Precious Metals Complex - 17th Dec 14
Wall Street Will Always Find An Excuse For Not Raising U.S. Interest Rates - 17th Dec 14
Torture, Terror And Elite Schizophrenia In The UK - 16th Dec 14
Eurozone Conflict Will Bring a Major Stocks Buying Opportunity - 16th Dec 14
Viewing Russia From the Inside - 16th Dec 14
Gold and Silver Stocks Bottom - Are We There Yet? - 16th Dec 14
The Financial Industry Pigmen Win Again - 16th Dec 14
Crude Oil Price Epic Blowout - 16th Dec 14
Asian Stocks Markets: Sand In The Gears Of The Bull Market - 16th Dec 14
U.S. Dollar Trend Forecast 2015 - Video - 16th Dec 14
Silver Price Bottom? - 15th Dec 14
Gold Price Base Building Bullish Pattern - 15th Dec 14
Stock Market Probable Pop-n-Crash Today - 15th Dec 14
Stock Market Time for a Bounce - 15th Dec 14
Stock Market Euphoria: The Mother of All Ponzi Schemes - 15th Dec 14
Gold - The Weight of Time as Trend - 15th Dec 14
U.S. Dollar Collapse? USD Index Trend Forecast 2015 - 14th Dec 14
The Rushing Stocks Bear Market and How to Prepare - 14th Dec 14
Gold and Silver Dreaming of a White Christmas - 14th Dec 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Dramatic Stock Market Selloff

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.


© 2005-2014 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

Free Report - Financial Markets 2014