Josh Brown of the Reformed Broker is one of the more sceptical, no-BS guys out there, so when he writes Housing Doubters Must Now Contend With Data we take notice.From his post:
No one in their right mind would refer to the current trend in housing as a rip-snorting bull market – but to dismiss the amelioration out of misplaced loyalty to a long-held pessimistic outlook would be a mistake.
The typical housing permabear (yes, there is a such thing now) will frequently cite the “shadow inventory” of foreclosures that will swamp the market when it comes up for sale. They don’t get it – it won’t be coming to market at all. At least not until such time as the banks want to offer it. And now there are hungry buyers, negating that aforementioned stale thesis even further.
This is definitely a thing: People are now starting to believe.
Home prices increased by 3.2% in the second quarter of 2012 compared with 1.2% in the second quarter of 2011. We historically see seasonal improvement in home prices in the second quarter; however, the home price increase in the second quarter of 2012 was larger than expected and the largest quarterly increase we have seen in the last few years. Higher home prices decrease the likelihood that loans will default and reduce the amount of credit loss on loans that do default.
Sales prices on dispositions of our REO properties improved in the second quarter of 2012 as a result of strong demand. We received net proceeds from our REO sales equal to 59% of the loans’ unpaid principal balance in the second quarter of 2012, compared with 56% in the first quarter of 2012 and 54% in the second quarter of 2011.
These factors, along with declining delinquencies at the firm, helped Fannie earn $5.1 billion for the quarter.
There’s been a host of other data to support the bull thesis.
The Case-Shiller house price index (considered the gold standard) is on the verge of going positive year-over-year.
The number of housing starts is on a clear uptrend.
And the EHB (homebuilder ETF) has been a star performer.
If this continues to materialise, this will be the most bullish trend in the US economy at a time when huge trading partners are flagging and the government is adding to economic woes in all kinds of ways.