Safer Way to Get Exposure to U.S. Housing MarketHousing-Market / US Housing Apr 18, 2013 - 06:17 PM GMT
George Leong writes:
I’m talking about the housing market and the continued recovery taking hold. The housing market is well off its early 2009 lows and is striving higher on the chart.
The number of foreclosures across America is declining, and this is a good sign, as a high foreclosure rate tends to place downward pressure on home prices.
If you are looking at picking up real estate, you better do so soon.
As long as the Federal Reserve continues to pursue its bond-buying program and place downward pressure on financing rates, the housing market will continue to improve. It’s all about the Fed and the easy flow of money into the economy. (For more about how the Fed’s easy money policy has helped the rich, read “Higher Taxes: Who Cares? Not the Rich.”)
In March, a total of 152,500 U.S. properties were foreclosed, which was a 23% year-over-year decline—this also drove the number of foreclosures in March to 442,117 properties, representing the best month since the second quarter in 2007, when the mess in the housing market soon began. (Source: “U.S. Foreclosure Starts Edge Higher for Second Straight Month in March as Bank Repossessions Continue to Drop,” RealtyTrac, April 9, 2013.)
It’s clear the housing market is on the right path, but whether it can continue to be as hot as it has been is uncertain; my feeling is that the easy money has already been made.
And what has been impressive has been the housing market’s recovery in spite of the lack of a strong recovery in the jobs market, which continues to struggle along, as demonstrated by the creation of a mere 88,000 new jobs in March and the edging up of the unemployment rate.
Once the jobs situation improves to where we are seeing the consistent creation of hundreds of thousands of new jobs monthly, I expect the housing market to follow suit.
The housing starts and building permits reports support the housing market recovery. In March, there were an impressive annualized 1.04 million housing starts, which was above the Briefing.com estimate of 935,000 and the upwardly revised 968,000 in February.
We did see some softness in the amount of housing projects that are in the pipeline. The building permits reading fell to an annualized 902,000 in March, below the Briefing.com estimate of 955,000 and the 939,000 building permits in February. Watch this metric, as it may suggest that there is some slowing on the horizon for the housing market.
Along with the lower foreclosure rates and higher buying activity have come steadily rising home prices. The S&P/Case-Shiller index, comprising the 20 largest U.S. metropolitan cites, increased a better-than-expected 8.1% in January, representing the 12th straight up month.
The technical analysis of the chart for the S&P Homebuilders Select Industry Index (NYSE/XHB) below shows the upward trend from the October 2011 bottom to its recent high in March, prior to its retrenchment down to the bottom trendline support. We could see a rally if the moving average convergence/divergence (MACD) turns upward and the support line holds, but be careful.
Chart courtesy of www.StockCharts.com
At this juncture, I’m optimistic; but as I said, much of the easy money in the housing market has been made.
If you still hold some of the hot homebuilder stocks, I suggest taking some money off the table.
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