Housing Update Spring 2012

There’s been much talk that the rising gas prices will derail the economic recovery. I will play the devil’s advocate here and say that last year around this time, gas prices spiked as well and it was short-lived through talks with OPEC and we may see that happen again here. I do agree that there is much tension in the Middle East so we have to keep a watchful eye on that situation. 

As for the positive turn in the economy and the increased consumer confidence, I am a believer that we are indeed turning the corner and this year may prove to be the stabilization of the housing market as a couple of the big banks had predicted. It still remains to be seen and we will have a better gage come mid-year.

On the plus side for housing, there will be a new pool of buyers coming out of the waiting period after a bankruptcy which spiked in 2005 although they are still de-leveraging and probably were laid off and now working at a job making less money. Or perhaps they are now a single income household versus a dual income household.

http://www.abiworld.org/am/template.cfm?section=Bankruptcy_Statistics1

In 2005, a record year for bankruptcy filings, 2.08 million cases were filed, with both individuals and businesses filing at higher rates than usual.

After the late-2005 rush to file, there was a lull, but in the years following, filings have increased steadily. Last year, 1.53 million bankruptcy cases were filed in the States, the highest since the law’s passage, and March’s numbers suggest that this year could have an even higher number.

I am also a believer that the trend is your friend and that numbers don’t lie.  I have been tracking the homebuilders since October 2011 and the trend has been increasing since then as the graph of the SPDR S&P Homebuilders ETF shows:

The indexes have also been trading in the positive.

Symbol	Name	Price	Change	Assets *	Avg. Vol	YTD
XHB	SPDR S&P Homebuilders ETF	$20.21	+2.33%	$1,232,036	6,554,611	+18.19%
ITB	iShares Dow Jones US Home Construction Index Fund	$14.17	+3.05%	$513,684	1,544,611	+19.28%
FLM	First Trust ISE Global Engineering and Construction Index Fund	$41.96	+2.47%	$36,801	7,917	+16.46%
PKB	PowerShares Dynamic Building & Construction Portfolio	$13.58	+2.18%	$28,014	17,108	+13.36%

And there is some good news coming down the pike to help the housing recovery. There are whispers of lending guidelines loosening and broadening; hopefully sometime this year. And with the new version of Harp 2.0, it is projected to be able to help an additional 4 million upside down borrowers.

There are more positive signs looming at this time this year as compared to this time last year. I believe we will have a better pulse on the situation come mid summer. Stay tuned.