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Is The Housing Recovery Over Already?

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    November 28, 2013

    The latest report on housing starts, due out this morning, was delayed due to the government shutdown. It’s not a good time for that to happen given the rising concerns lately that the housing industry, so important to the economy, may be slowing, perhaps even from another bubble already.

    The report of permits for future starts was released this morning and showed they were up 6.2% in October. But unfortunately, that was almost all due to a big 17% increase in permits for apartment complexes, still in greater demand than single family homes thanks to the anemic economy. Permits for single family homes were up less than 1%.

    And the S&P/Case-Shiller Home Price Index, also released this morning, showed home prices were up only 0.7% in September, the smallest amount since last February. David Blitzer, chairman of the index committee at S&P, said “The strong price gains in the West are sparking questions and concerns about the possibility of another bubble. However the talk is focused on fear of a bubble, not a rush to join the party and buy.” He noted that recent housing reports indicate the housing market is starting to shift to slower growth.

    Meanwhile, Reuters reported this morning in an article titled “A New Wave of U.S. Mortgage Trouble Threatens” that “U.S. borrowers are increasingly missing payments on home equity lines of credit they took out during the housing bubble, a trend that could deal another blow to the country’s biggest banks. The loans are a problem now because an increasing number are hitting their 10-year anniversary, at which point borrowers usually must start paying down the principal on the loans as well as the interest they had been paying all along.

    More than $221 billion of these loans at the largest banks will hit this mark over the next four years, about 40 percent of the home equity lines of credit now outstanding.

    For a typical consumer, that shift can translate to their monthly payment more than tripling, a particular burden for the subprime borrowers that often took out these loans. And payments will rise further when the Federal Reserve starts to hike rates, because the loans usually carry floating interest rates.

    The number of borrowers missing payments around the 10-year point can double in their eleventh year, data from consumer credit agency Equifax shows. When the loans go bad, banks can lose an eye-popping 90 cents on the dollar, because a home equity line of credit is usually the second mortgage a borrower has.”

    Is it already too late to take advantage of the housing recovery.

    Upcoming housing reports will be unusually important.

    Happy Thanksgiving to all!


    NOTE: There will be no blog post on Thursday, Thanksgiving Day! I’ll be back with the next regular blog post on Saturday morning, as usual later than the week-day reports, probably around 12 noon.


    To read my weekend newspaper column click here:  The Fed Is Backed Into A Corner


    Subscribers to Street Smart Report: In addition to the charts and commentary in the secure area of today’s blog, there will be an in-depth mid-week Markets update tomorrow in your secure area of Street Smart Report.com 

    Images: Flickr (licence attribution)

    About The Author – Sy Harding, Street Smart Report

    Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!

    It includes our research and analysis on the economy and markets, and provides charts and buy and sell signals on the major market indexes, sectors, bonds, gold, individual stocks and etf’s, including short-sales and ‘inverse’ etf’s.

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