Will Improvement in Housing Index Last?
Rising unemployment won't promote continued strength.
Over the past couple of months, I've had many people tell me the housing bottom is in. Supposedly the stock market bottom is in, as well, and in just a couple years, the S&P will be back at 1500. Really?
Stock market bulls seem unaware of how weak earnings will be as consumers continue to retrench and unemployment climbs. As noted previously, "Buy The Dip" Mentality Is Fully Entrenched among fund managers and individual investors in spite of the fact Insiders Dump Shares at Fastest Pace in 2 Years.
Moreover, housing bulls tend to ignore shadow inventory, seasonal factors, and temporary effects of the soon-to-expire $8,000 first-time home buyer credit.
Shadow Housing Inventory Will Halt a Housing Recovery
iStockAnalyst is reporting Shadow Housing Inventory Will Halt a Housing Recovery.
"Any optimist talking up a housing recovery might want to pause and look deeper into the housing crisis. Amherst Securities Group analysts believe the market faces about seven million properties that are likely to be seized by lenders have yet to hit the open market. There are two sources that contribute to a huge shadow housing inventory; ARM mortgages which are due to reset now through 2012 and current home owners who are struggling to make payments.
"Assuming no other properties are on the market, it would take 1.35 years to sell this inventory based on the current pace of existing-home sales, said analyst Laurie Goodman.
"The favorable seasonality will be over come the October housing numbers and the reality of a seven-million-unit housing shadow inventory is likely to set in.
"The uptick in the housing numbers are due to banks slowing down the filing of forecloses due to the government loan modification program, the spring/summer seasonality strength of the housing market, buyers rushing to take advantage of the soon-to-expire $8,000 first-time home buyers credit and the record low mortgage rates thanks to the Federal reserve buying treasuries to help keep mortgage interest rates artificially low but that program is due to be over during the first quarter of 2010.
"When the shadow inventory is unleashed and government is out of stimulus gun powder for the housing market, reality that the housing correction is not over will set back in."
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter