Best of the Week
Most Popular
1.Is the Stocks Bull Market Over? Dow Trend Forecast into End January 2015 - Nadeem_Walayat
2.Gold and Silver Stocks Apocalypse Now, Bear Market Review - Rambus_Chartology
3.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
4.Ebola Terror Threat Suicide Bio-Weapons Threatens Multiple 9/11's, Global Plague - Nadeem_Walayat
5.Second-Richest Man Says Mortgages Now a "No Brainer" - Dr. Steve Sjuggerud
6.Gold And Silver Still No End In Sight - Michael_Noonan
7.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
8.The Gold Bug is Set to Bite Back - EWI
9.How Alibaba Could Capitalize on the EBay-PayPal Split - Frank_Holmes
10.The Consequences of the Economic Peace - John_Mauldin
Last 5 days
Focus on Graphite Companies with Green Energy and Technology Strategies - 22nd Oct 14
Crude Oil Price Hitting Bottom - 22nd Oct 14
Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - 22nd Oct 14
Gold Or Crushing Paper Debt Stocks Crash? - 22nd Oct 14
India Gold Demand Surges 450% and Bank of Russia Demand At 15 Year High - 22nd Oct 14
Bitcoin Stock Exchange Could Be "More Valuable than Alibaba" - 22nd Oct 14
Currency War - How to Profit from a Stronger U.S. Dollar - 22nd Oct 14
Banks Hold Treasuries and Make Loans- 22nd Oct 14
Gold and Silver Timing is Everything - 22nd Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VII) - 22nd Oct 14
Follow the Baby Boom to Biotech Stock Profits - 22nd Oct 14
Copper, Nickel and Zinc Won't Be Cheap for Long - 22nd Oct 14
How Will We Know That the Gold & Silver Price Bottom Is In? - 21st Oct 14
Is Gold as Dead as Florida Hurricanes? - 21st Oct 14
First Swiss Gold Poll Shows Pro-Gold Side In Lead At 45% - 21st Oct 14
The Similarities Between Germany and China - 21st Oct 14
The REAL Reason Why the Stock Market Turned Down - 21st Oct 14
Petrobras is a 'Scheme, Not a Stock' - 21st Oct 14
Stocks Bear Market Indicator Is Off the Mark - 20th Oct 14
Stock Market Ideal Turning Point is at Hand - 20th Oct 14
Investors Quit Complaining, The Environment is Perfect Right Now - 20th Oct 14
Ebola Armageddon Could Trigger a Rebirth in Gold and Silver Prices - 20th Oct 14
Gold vs Euro Risk Due To Possible Return of Italian Lira - Drachmas, Escudos, Pesetas and Punts? - 20th Oct 14
Stocks Rebounded Following Recent Sell-Off, But Will It Last? - 20th Oct 14
U.S. Responsible for West Africa Ebola Outbreak Says Liberian Scientist - 20th Oct 14
Stock Market Intermediate B Wave has Started - 20th Oct 14
Gold Stocks Analysis – FNV, CG, NCM, SBM - 19th Oct 14
Stock Market Primary IV Wave Counter Trend Rally - 19th Oct 14
Gold And Silver - Financial World: House Of Cards Built On Sand - 18th Oct 14
Anatomy of a Stock Market Sell-Off - 18th Oct 14
Why OPEC Has Declared an Oil War on Russia - 18th Oct 14
Gold and Silver Extreme Shorting Peaks - 18th Oct 14
Bitcoin Price Fall to $350? - 18th Oct 14
Tesco Supermarket Crisis Worse To Come as Customers Vanish! - 18th Oct 14
Sheffield Roma Crisis School Place Application's Fraud Perfect Storm - 17th Oct 14
Stock Markets, Commodities and Indicators - 17th Oct 14
“Save Our Swiss Gold ” - Game Changer For Gold? - 17th Oct 14
How to Trade the Ebola Stock Market Sell-Off - 17th Oct 14
When... Not if... Crude Oil Price Drops Below $70 - 17th Oct 14
Either You're The Butcher or You're The Cattle - 17th Oct 14
Gold Benefits from Market Uncertainty - 17th Oct 14
Stock Market Pullback Underway, Euro downside, Commodities - 17th Oct 14
Stock Market Seven Year Cycle and A Correction Ahead? - 17th Oct 14
Three Ways to Play Uranium: Top Stock Picks - 17th Oct 14
America Flirts With Deflation - 17th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

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