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The Associated Press – Homebuilder optimism rises for 5th straight month

Builders’ sentiment rises for 5th straight month, to highest level since in nearly 5 years
U.S. homebuilders are gradually growing more optimistic about the depressed housing market and believe homes sales could pick up sharply when the spring buying season begins. The National Association of Home Builders/Wells Fargo said Wednesday that its builder sentiment index rose for a fifth straight month in February to 29, up from 25 in January. The index has climbed 15 points since September and is now at its highest level since May 2007. Builders have generally become more hopeful during that stretch about current sales, sales six months out and foot traffic, the report shows. Even with the brighter outlook, the industry has a long way to go. Any reading below 50 indicates negative sentiment about the housing market. The index hasn’t reached 50 since April 2006, the peak of the housing boom. A key reason homebuilders are more optimistic is they are seeing more people express interest in buying a home. And rising interest has occurred alongside other improvements that suggest the troubled housing market could pick up after four weak years.

The Wall Street Journal – Toxic? Says Who? Taste For ‘Subprime’ Returns

Investors’ belief that the worst is over for the U.S. housing market is fueling renewed interest in once-toxic mortgage bonds that were at the heart of the financial crisis. Prices of some distressed bonds backed by subprime home loans—those issued before the crisis to borrowers with sketchy credit histories—have chalked up double-digit percentage gains this year, with one prominent market index rising 14%. The rally has drawn investors back to a corner of the credit markets that was pummeled from 2007 to 2009 and has been volatile since. The latest upswing has some money managers setting up investment funds dedicated to buying beaten-down mortgage bonds, hoping to reap fat yields while waiting for the housing market to turn. The recent resurgence in battered mortgage bonds that were left for dead during the crisis reflects how investors’ appetite for risk is returning, even after many banks and hedge funds lost money last year on similar assets.

Source:
Bianco Research

Category: Real Estate

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13 Responses to “Signs Of Life In The Housing Market?”

  1. Expat says:

    Median household income is 49500 USD, still declining. Unemployment as measured by traditional means is over 15%. Housing inventories are still at extremely high levels. Distressed and REO inventories are massive. Interest rates may stay low for another year, but they will rise…oh, will they rise.

    The median house price is about $155k which is STILL 3.13 times income. This is still over the long term average for this ratio and much too high for the present economic conditions. In order to mean-revert, and why should it not since it is a ratio which has strong fundamentals, we need to go deep under 3 times income.

    Housing market median price is heading to about $130k, another 15% decline from here. Or at best stable until incomes reach closer to 60k .

    There is no ray of sunshine in US housing except for the banks who are getting billions in taxpayer handouts again.

  2. Expat says:

    Zillow is calling the US median price 147k, so perhaps we are not so far from the bottom yet…only 11% to go.

  3. MayorQuimby says:

    False dawn. There is no “bottom” nor any “top”. It is a dynamic and fluid situation. All this talk about bottoms as if we have another 75 years of uninterrupted price appreciation and economic expansion ahead of us with the entire western banking system completely insolvent and most governments on the verge of fiscal ruin.

    Get real.

    The capacity to service debt is limited to fewer and fewer people. Hardly any right now. So I expect this uptick will be short lived and we will stubbornly return to lower starts, prices and more bearishness only this time with higher taxes, cost of living and hardly any options left for the Fed and scumbags in control (for now) at the top.

  4. SkyBlaze says:

    Signs of Life…..?

    Shadow Inventory, recient changes to Foreclosure process………..sustainable rebound is a long way off. Sorry…

  5. constantnormal says:

    the first chart in the following item tells me all I need to know about the state of our so-called “housing market” …

    http://advisorperspectives.com/dshort/guest/Lance-Roberts-120225-The-Housing-Recovery-In-One-Index.php

  6. rubicon_runner says:

    WOW! After reading Expat and MayorQuimby, I want to go eat a gun.
    I’m not smart enough to determine the bottom but for the first time in my life, I am buying rental property at wonderful valuations with nice double digit returns.
    PS. We are also in a non judical sand state where the REO’s are moving unlike NYC, they have a 10 year log.
    Real Estate is regional again.

  7. Mike in Nola says:

    The problem is that the builder’s index is as much of a sentiment index as anything. No hard numbers to measure. Obviously, if these guys had been better at judging the market, there wouldn’t have been so much overbuilding and so many McMansion REO’s.

  8. MayorQuimby says:

    Rube-

    Rentals are probably the best way to go.

  9. VennData says:

    “… Unemployment as measured by traditional means is over 15%….”

    Why did some folks witch to a new unemployment measure, and keep repeating that new measure over, and over and over again? Did they use that measure when there was a GOP President…. oh… they didn’t. What a coincedence, where’s your birth certificate Expat?

    Household formation is important. That’s rising. Oh an the BEA also disagrees with you about personal income, Expat…

    http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm

    What is it about facts and Republicans… like vinegar and water.

  10. theexpertisin says:

    MayorQuimby–

    I agree 99.0%. Personal rental holdings and those under my management in three states have been over 98% occupied since 2008 with very few turning over. Rents are increased annually and tenants don’t blink (good service and clean units don’t hurt).

    The 1%? I see are many buying distressed properties on the cheap and rehabbing them. Problem is, most are rookies in the business and just don’t have the skill sets to keep out of trouble after tenant #1 moves in. One poorly selected tenant who neglects to pay rent and then proceeds to trash the property is a rude awakening for these folks. Then, they can’t price out repair costs effectively and end up paying retail rates – which is a sure route to financial chaos.

    I see more than a few newby landlords get out after a year or two – and the same properties are in foreclosure (or vacant and left to rot) again.

  11. louis says:

    Inventory like NYSE Volume out West.

  12. Expat says:

    The Census coverage rates has dropped from 93% in 1986 to 89.7% in 2005 so that is one difference in measurement. The average age of the workforce has risen from 35 to 42 which should bring about much lower rates to reflect what is typically greater job stability in older employees; the measurements of unemployment have not been adjusted for this (ok, it’s a statistical tweak which does not change the real number but changes the impact of the number). There is a larger movement of people from the counted to the uncounted column in this recession vs earlier recessions (seventies and eighties) because of its length and depth. The de-industrialization and consequent shrinking of unions has meant that more workers suffer sooner without union support during layoffs (including health care and come minimal payments).

    I had trouble understanding your comments regarding my patriotism and my partisan tendencies, so let me state for the record that my birth certificate is American and foreign since my father was serving in the armed forces abroad. My politics can be boiled down to this: Bush was probably the worst modern US president except for Obama who is still better than Bush because at least he is black. Additionally, all politicians (every stinking elected official who has held public office and is still alive) should be waterboarded for six months and then sent to live in Afghanistan with no money. So take your pompous, politically biased bullshit and stuff it up your ass, ya barmy git!

    What does your link say about median household income? I did not mention personal income. And you were on such a roll, too! Apparently, the foam frothing from your lips obscured my post.

  13. Frwip says:

    See Calculated Risk two weeks ago.

    http://www.calculatedriskblog.com/2012/02/housing-bottom-is-here.html

    He also calls for a bottom, but with one important caveat. It’s a volume bottom, not a price bottom. See:

    http://www.calculatedriskblog.com/2009/07/housing-remember-two-bottoms.html

    What’s is likely is that we are close to a volume bottom and that RE prices should stabilize in NOMINAL prices, ex-inflation. But it may be years away of a real price recovery. It took five years after the RE crash of the early 90s for prices to start recovering in real terms after marking the volume bottom. Given the huge overhang from the 00s (shadow inventory, impaired titles, etc), it may take even longer this time around.

    The prospect of a stabilization just in nominal terms is still pretty important, for buyers and mortgage markets alike. It allows hypothecation to play again its role as a credible guarantee for principal recovery on defaults, a role it cannot play when mortgages are at risk of going underwater. New buyers don’t have to fear being stuck with a house in case of an adverse event (or simply, having to move somewhere else). Banks can also count on decent recovery in case of a default by mortgagors, so underwriting standards can go back to something a bit saner than they currently are.

    So, that’s at least one element of a true recovery which is starting to gel in place. About time.