Industry data support the notion that housing demand is now in an uptrend.

Constructive on U.S. Housing
Doug Kass
Apr 27, 2012 | 7:58 AM EDT

Stock quotes in this article:
TBT, TBF, TLT
Industry data support the notion that housing demand is now in an uptrend.
A new development is catching home buyers off guard as the spring sales season gets under way: Bidding wars are back.
From California to Florida, many buyers are increasingly competing for the same house. Unlike the bidding wars that typified the go-go years and largely reflected surging sales, today's are a result of supply shortages....
Competitive bidding in the current environment isn't producing huge price increases or leaving sellers with hefty profits, as occurred during the housing boom. Still, the bidding wars caused by tight inventory provide the latest evidence that housing demand is starting to pick up after a six-year-long slump.
An index that measures the number of contracts signed to purchase previously owned homes rose in March to its highest level in nearly two years, up 12.8% from a year ago and 4.1% from February, the National Association of Realtors reported on Thursday.
"We very much believe we've hit bottom," said Ivy Zelman, chief executive of a research firm, who was among the first to warn of a downturn seven years ago. Earlier this week, she raised her home-price forecast for the year, calling for a 1% annual gain, up from a 1% decline....
Inventory levels in many markets were at the lowest level in years. At the current pace of sales, it would take just 1.5 months to sell all the homes listed in Sacramento, Calif., and 2.4 months to sell all the homes listed in Phoenix. San Francisco and Washington, D.C., each have 3.4 months of supply, while Miami has 4.1 months of supply.
-- Nick Timiraos, "Stunned Home Buyers Find the Bidding Wars Are Back," The Wall Street Journal (April 27, 2012)
I continue to hold to the variant view that the emerging and durable recovery in the U.S. housing market will be one of the biggest economic stories in the next 12 months (and beyond).
Too many are reacting to the bad, backward-looking Case-Shiller data. (The index has a two- to three-month lag and 30% of its transactions are distressed, so it will be under pressure for now.) Driving your car while looking in the rearview mirror is fine if the road is straight and clear, but it's not such a good idea when the road is curved and rife with obstacles. And the U.S. housing market is nothing if not a long, winding and bumpy road.
The real story is that the U.S. home market is now bifurcated (historically, a signal of a nascent recovery), stress pricing has stabilized, new-home prices are going up and so are existing-home prices (none distressed). As The Wall Street Journal article above indicates, inventory is being cleared.
Industry data support the notion that housing demand is now in an uptrend. One company after another is reporting improving weekly metrics -- surveys, traffic, shipments and orders.
My analysis, as discussed in my lecture at the Kellogg School of Management, Northwestern University on Monday night, suggests that housing demand and home prices will steadily improve in the years ahead based on the underpinnings of record home affordability, low home prices relative to rental prices, underproduction of new homes, continued household formation growth, steady growth in the jobs market, an easing up in mortgage lending, and low (by historic standards) mortgage rates -- all of which will conspire to unleash pent-up demand.
From my perch, housing is embarking on a durable multiyear recovery that could extend throughout this decade, and residential real estate's broad multiplier effect will likely cushion the U.S. economy from the monetary and fiscal cliffs and some of the plentiful structural headwinds that have served as a governor to expansion.
The economic consequence to the rebound in housing could be profound, providing construction jobs and lifting consumer confidence and spending.
This constructive housing view is central to my thesis that the domestic economy's growth will be self-sustaining and supportive of reasonably healthy corporate profits.
It is also central to my short bond analysis and view.

How About Some Weekly Real Estate Advice...

HOW TO DETERMINE THE PRICE OF YOUR HOME

By Steven J. Tamburello

              Why is it that some homes sit on the market for a year while others sell like hot cakes?  Frustrated sellers will blame a bad market, while a good real estate professional will tell you that many times, a slow sale is often attributed to the listing price.

              If a home is overpriced, buyers will stay away.  But, if the price is competitive with similar homes in the area and “shows” better than the competition, it will have a better chance of being sold quickly.

              The secret is perfecting a technique that’s as American as apple pie: comparative shopping.

              Although comparing houses with different styles, square-footages and locations is challenging, real estate professionals still feel it’s one of the best methods to use when determining a home’s market value.

              A responsible real estate agent will effectively evaluate a home’s worth through a process known as Comparative Marketing Analysis (CMA).  Taking a look at assets, such as a swimming pool, bigger than normal living spaces, a fantastic view, adjacent city parks and other attractions, the agent will begin to compare your home with similar properties, called “comparables,” that have sold in the area within the last six months.  Typically, the agent is able to recommend a realistic price range that will ensure you top dollar and a reasonably short time on the market.

              However, factors such as the amount of time needed to sell your home can alter the agent’s price recommendation dramatically.  Typically, people should check with real estate offices in the community to determine the typical duration that listings are on the market.  Sales associates will explain that the marketing “norms” vary with prices and properties.  Based on this criteria, the agent feels confident that he or she will be able to sell it for a price that both you and the buyer will be happy with.  However, if you’re under time constraints because of unexpected job changes or moving agreements you’ve made on another property, this will narrow your chances of selling the home for top dollar in the market.

              Assuming you have sufficient time to market the home, here are a few small steps you and your agent can take to finding the right price for your property.

              The best comparisons can be made with similar homes that have been sold within the last 45 days as opposed to the standard six months.  Any longer and other factors, such as the economy, could cloud your view of how much your home is really worth.

              Another good benchmark is to review the selling prices of homes that have just been sold and are pending closes.  Most MLS services provide information on deals pending that most real estate agents should be able to shore with you.

              A good rule of thumb before setting a price is to make 20 comparisons of comparable properties within a one-mile radius of your house.  Once completed you can feel comfortable that the price you’ve picked is a good gauge of the home’s worth and won’t discourage qualified buyers.

              Being open and honest about what you see as the home’s greatest strengths and biggest weaknesses will also help an agent get a better feel for how to best evaluate (or assess) and market your home.  Think of your home as if you were the buyer.  If your home is listed at the right price, you’re well on your way to a speedy and fruitful sale.