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
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
Cyprus-style Bank Bail-ins to Take Deposits and Pensions - The Global Bankers' Coup - 13th Dec 14
How To Renounce Your US Citizenship And Become Stateless - 13th Dec 14
Stock Market Downtrend Underway - 13th Dec 14
Gold And Silver - Wall Street, aka United States, Pulls Off Another Destructive Coup - 13th Dec 14
U.S. Congress Has Guaranteed the Secular Stocks Bear Market is Not Over - 13th Dec 14
Gold and Silver Starting to Show Bullish Signs - 13th Dec 14
Arab Spring II is Coming Fast - The Unintended Consequences of Lower Oil Prices - 13th Dec 14
Commodities - Is Inflation Oversold? - 12th Dec 14
Stock Market SPX Top Valuations - 12th Dec 14
Scary Stocks Investors Should Shun in 2015 - 12th Dec 14
New York Times on Benefits of Gold in Currency Wars - 12th Dec 14
Will Crude Oil Kill The Zombies? - 12th Dec 14
Largest Financial Bubble in History - 10 years of 'Why Sell Now?' - 12th Dec 14
How the Rising U.S. Dollar Could Trigger the Next Global Financial Crisis - 12th Dec 14
Central Banks and Government Policies Control the Markets Myth - 12th Dec 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Dramatic Stock Market Selloff

Why It’s a “Fake” U.S. Housing Market Recovery

Housing-Market / US Housing Jan 15, 2013 - 02:06 PM GMT

By: Profit_Confidential

Housing-Market

Michael Lombardi writes: Michael Lombardi writes: The U.S. housing market is becoming a main topic again in the mainstream media these days. I keep reading about how rising home prices will now get the U.S. economy going again.


The National Association of Realtors (NAR) expects average existing home prices in 2013 to be around $185,800, with an increase to $193,600 by the end of 2014. (Source: National Association of Realtors, January 2013.)

But what’s fuelling the soft rebound in the U.S. housing market and home prices is something that’s never happened in our history. It’s not individuals buying houses who are moving prices and demand higher; it’s institutions. Yes, big institutional investors are buying houses—and in a big way!

The Blackstone Group L.P. (NYSE/BX) bought $2.5 billion worth of U.S. homes—that’s 16,000 units in total so far, with cash! In October of 2012, the company owned $1.5 billion worth of homes and was spending $100 million a week to purchase more! (Source: Bloomberg, January 9, 2013.)

Other companies like the Colony Capital LLC and Waypoint Homes are taking similar courses of action as the home prices increase. Colony Capital has already purchased 5,500 homes since April of 2012 and expects its investments to increase to $1.5 billion by the end of this year. Waypoint Homes has bought 2,500 home and plans to have a total of 10,000 homes by the end of 2013.

Institutions are pouring big money into buying individual homes, fixing them up, and then turning around and renting them. And more and more companies are entering this new “game.” As an example, Silver Bay Realty Trust Corp. (NYSE/SBY) raised $245 million in an initial public offering (IPO), and it plans to get involved in the markets for single-family homes.

With that said, the U.S. housing market isn’t seeing any real recovery—a recovery that we can look at and say it will help the economy. Let’s face it; as soon as institutional investors can get better returns for their money elsewhere, they will be out of housing and moving on to the next thing. Home prices increasing may have been great for speculators and investors, but not for the economy.

Dear reader, the U.S. housing market is missing the most important element: first-time homebuyers. Currently, home prices are rising because institutions are rushing in to buy. The returns investors can get elsewhere are miniscule, so they are moving into rental housing.

First-time homebuyers accounted for 30% of the existing home sales in November of 2012 and 35% in November 2011. (Source: National Association of Realtors, December 20, 2012.) The number of first-time homebuyers in this market is declining—not what you’ll see in a true housing rebound.

Michael’s Personal Notes:

It’s Sir John Templeton, a famous investment pioneer, who said, “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” (Source: Sir John Templeton.org, last accessed January 10, 2013.)

Templeton’s quote reminds me of the stock market today. We’re still seeing a rally in the S&P 500 index (while the Dow Jones Industrial Average is stagnant). As the S&P 500 rallies and key stock indices break above their previous highs, I become more skeptical about future returns from stocks.

I see a wave of optimism pouring into the stock markets. Stock advisors and investors alike are turning optimistic about the outlook of key stock indices—meanwhile, nothing has really changed in the U.S. economy or elsewhere in the global economy.

Dear reader, if there is one thing you take away from my commentaries each day, I hope it is this: the general consensus, what the majority of people believe, usually doesn’t happen.

In the fall of 2007, when key stock indices were at record highs, we heard calls for the stock market to go much higher. But it collapsed instead.

In 2009, when the Dow Jones Industrial Average hit a low of 6,440, pessimism reigned and the outlook was for even lower stock prices. But, instead, the second biggest bear market rally in history began and key stock indices like the Dow Jones Industrial Average rose quickly.

Right now, the popular media, stock advisors, and investors are as bullish as I’ve seen them. I read something the other day that said me and Gary Shilling are the last bears standing. This can’t be good!

Investor sentiment is getting much too complacent? The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) is showing investor sentiment turning optimistic big-time. The VIX essentially shows the level of fear in the key stock indices.



  Chart courtesy of www.StockCharts.com

Since the beginning of the year, the VIX has fallen off a cliff, meaning investors hold a very optimistic view on the key stock indices.

As optimism increases and key stock indices rise a little further, you shouldn’t get lured into believing that the stock market is going much higher. The structural, fundamental problems of the economy haven’t been fixed and some big-cap companies are still struggling.

If stock advisors and investors are optimistic on the health of the global economy, they are wrong. The eurozone continues to weaken, global trade is deteriorating, and even emerging markets are starting to struggle. I’m seeing increased optimism based on a whole lot of nothing.

What He Said:

“The U.S. lowered interest rates in 2004 to their lowest level in 46 years. And what did Americans do with their access to easy money? They borrowed and borrowed some more, investing the borrowed money into real estate. Looking ahead, perhaps the Fed’s actions (of lowering interest rates so low as to entice consumers to borrow more than they can afford) will one day be regarded as one of the most costly errors committed by it or any other banking system in the last 75 years.” Michael Lombardi in Profit Confidential, July 21, 2005. Long before anyone was thinking of a banking crisis, Michael was warning that the coming real estate bust would wreak havoc with the banking system.

Source -http://www.profitconfidential.com/real-estate-market/why-its-a-fake-housing-market-recovery/

Michael Lombardi, MBA for Profit Confidential

http://www.profitconfidential.com

We publish Profit Confidential daily for our Lombardi Financial customers because we believe many of those reporting today’s financial news simply don’t know what they are telling you! Reporters are trained to tell you the news—not what it can mean for you! What you read in the popular news services, be it the daily newspapers, on the internet or TV, is the news from a “reporter’s opinion.” And there’s the big difference.

With Profit Confidential you are receiving the news with the opinions, commentaries and interpretations of seasoned financial analysts and economists. We analyze the actions of the stock market, precious metals, interest rates, real estate and other investments so we can tell you what we believe today’s financial news will mean for you tomorrow!

© 2013 Copyright Profit Confidential - 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