It is a good housing news day. Housing starts and permits increased more than expected in May, offering signs of improvement in the sector. There were 532,000 new housing starts, up from 454,000 in April and well above the consensus of 485,000, while permits increased to 518,000 from 494,000, also above an anticipated 508,000. Homebuilders’ stocks advanced for the first time in five days after the housing report reinforced evidence that the industry’s decline, now in its fourth year, will end in the second half.
Meanwhile, the producer price index, which measures prices of goods at the wholesale level, increased far less than expected. It ticked up 0.2% in May, less than an 0.3% rise from the month prior, and it undercut expectations for an 0.6% increase. Excluding food and energy, it fell 0.1%, while economists had expected it to be unchanged from an 0.1% increase a month prior.
You know I've been talking about the "green shoots" of recovery happening in the housing market for some time now. In case you've missed them, read this:
California Home Price Bottom?
More on Housing Bottom and Our Plan
Housing Bottom this Summer
Pending Home Sales Surge, Free Foreclosure Profits Tonight
Then I read this today from Jim Cramer at TheStreet.com and had to share it with you. As I've been saying, I'm not the only one who sees the Housing Bottom.
Jim Cramer Blo
The Sound You Hear Is Housing Hitting Bottom
By Jim Cramer
RealMoney Columnist
6/16/2009 9:49 AM EDT
The housing bottom is here. With the explosion in starts in the South and West, the two areas hardest hit, we now know that the inventories have gotten too low, and the homebuilders sense that we have come to an end of the long national housing nightmare.
When you see that large a build as in these two areas and you see that housing permits are up for three straight months, you can't wait to sound the all-clear. The homebuilders certainly won't do it, as they are holding out for a bigger tax credit for homebuyers — $15,000, and not just limited to first-time homebuyers. I can't tell you definitely that you won't get this, but I know that the president and the Treasury secretary don't want it, and they feel it is an unfair giveaway.
I would not buy a single homebuilder on this news — not Lennar (LEN) , not Toll Brothers (TOL) , not Hovnanian (HOV) , not KB Home (KBH) and not Pulte (PHM) or D.R. Horton (DHI) . They won't make any money unless there is house-price appreciation, and that's years away.
No matter, you could tell this bottom was coming simply by the sales — in many areas 10 times the number of last year — 10 times! That eats through a lot of areas.
Also, it puts to rest the ridiculous canard that rates have moved up too far to keep housing. That's an odious lie, as anyone trying to get these precise rates last year at this time would have been totally unable to do so. Affordability and the one-time tax credit mean much more than rates anyway in terms of spurring buying. And they are at incredibly advantageous levels.
Remember the cycle. At the bottom there's an explosion in sales, as no new supply comes on and demand overwhelms. It is the same as in stocks: Every bottom, there's no new supply, and demand overwhelms. We are there. Don't over-think it. No one will call it. But the data are now so crystal clear that it would be ridiculous to not say it.
Now let's be clear. I am simply saying that house price depreciation is over, and now house-price stabilization has begun. I suspect stabilization will last for some time, and I do not predict appreciation at all, as supply will come out of the woodwork to meet this demand. We are simply at equilibrium. At equilibrium, the vast backlog of toxic bonds becomes detoxified — all but home equity, which is a total wipeout — and the prices should continue to rally. That started a month ago.
This is the best news possible for the economy, as housing net worth is presumed to be going down endlessly. But it has stopped. The vast majority of so-called houses worth less than the mortgage, a totally overrated indicator, are going to shift in favor of the mortgage being worth more than the house.
The bottom is here. Right in the nick of time.
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I hope you are ready for this… and out there calling sellers and REO agents about buying their properties for well below even todays low market values. There are deals happening everywhere, but not for everyone. You must know which deals to chase and which to let go. You must know who is motivated to sell and who is not. You must know what to offer them to lock in your 15% profit on your purchase. And you must know how to contract your deals so they get accepted by both your seller and your investor (if you plan to use outside money to fund your deals).
And this is exactly what I will be talking about in my next Mastering Mini Lab Live Webinar, Tuesday, June 23rd at 6pm PDT. You must register in advance as this is an interactive webinar that I keep small to take your questions throughout the Call. And there are pre-requisites to attend. Call 800-310-7730 x2 for the details. Or visit: http://www.foreclosures.com/pages/mastering_community.asp
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