Daily 5: Consumers More Optimistic About Home Prices

1. Fannie Mae Reports More Positive Expectations

From Fannie Mae:

WASHINGTON, DC – Amid a spate of positive economic news during the November survey period, consumer sentiment appears to have stabilized from previous levels, with only incremental improvement in the deeply negative housing market sentiment witnessed this summer. According to results from Fannie Mae’s November National Housing Survey, home price expectations moved from negative to positive territory for the first time in six months, with respondents expecting home prices to increase by 0.2 percent over the next year.  Overall, trends demonstrate that consumers are in a “wait and see” pattern as we move into 2012. This places consumer sentiment in line with Fannie Mae’s Economics & Mortgage Market Group’s November forecast of temporary economic improvement during the third and fourth quarters of 2011 leading into a slower economic growth path in 2012.

Twenty-two percent of respondents expect home prices to increase over the next year (up 3 percentage points since last month), while 22 percent say they expect home prices to decline, down 1 percentage point since last month. 53 percent say prices will stay the same, a 2 percentage point drop from October.

2. Goldman and Barclays Both Pick Housing’s Bottom

First, Goldman Sachs, via The Wall Street Journal:

Goldman’s analysts, Hui Shan and Sven Jari Stehn, project that the national S&P/Case-Shiller home price index has 2.5% to fall before it hits bottom next summer. The Case-Shiller index of prices in 20 large cities is likely to fall 3.5% before hitting bottom in the second half of 2012, they say.

How do these forecasters reach this conclusion? Well, that’s where things get complicated.

The analysts constructed a new model of home prices in 147 U.S. metro areas, estimating an “equilibrium” home price for each. That measurement is an expected home price based on population, income, lending costs and construction costs. Nationally, they say, home prices are close to this equilibrium level after deviating far from it during the boom years.

The analysts’ modeling also takes into account short-term price changes, including factors like the excess supply of homes on the market and the level of subprime loans in a particular market.

So, no specifics, but some assurances that they looked at lots of factors.

And, Barclays, from HousingWire:

Barclays Capital analyst Stephen Kim predicts a housing recovery buoyed by improving jobs numbers and the fact prices for nondistressed homes will have stabilized without government support.

“In the absence of a government homebuyer incentives, prices for non-distressed home sales have stabilized for almost a year,” Kim said. “This is the most important trend in the housing industry right now, and we are amazed at how little attention it has been getting from the media and the street. This stability on the part of nondistressed prices has occurred despite a very high share of distressed activity and continued declines in overall prices.”

Barclays said recent economic data — including higher job creation in November, housing starts and improved homebuyer traffic — point to some improvement potential in the sector.

3. Top Bloomberg Forecaster Expects Housing to Drive Job Growth

On UBS’s Maury Harris:

It isn’t a story of gloom and doom–although Harris worries that the turmoil in Europe will weigh on growth in the U.S. He sees some unexpected bright spots driving U.S. expansion and preventing a renewed downturn, Bloomberg Markets reports in its January issue.

Harris’s predictions matter. His team is No. 1 among economic forecasters for the world’s largest economy during the two-year period ended on Sept. 30, according to data compiled for Bloomberg Markets’ annual ranking.

Harris, a native of Waco, Texas, says one of the most important pieces of evidence favoring continued U.S. growth is home prices.

“We think that house prices have stabilized,” Harris says. That’s crucial, he adds, because what makes the aftermath of the 2008 to 2009 U.S. financial meltdown different from its post- World War II predecessors is that the housing market has taken so long to recover.

 4. Bottom-Pickers Have Smelly Fingers

Throughout the housing bust, there have been “experts” predicting that the bottom was near and that prices would be going up soon. Generally, they focused on economic headlines when justifying their calls: home prices stabilizing, jobs stabilizing, price-to-rent rations, replacement costs, etc.

What they don’t do, and why they have all been wrong for over six years now, is ask “why” various economic indicators flash positive. They don’t consider the  artificial conditions that created the false-positive. And they don’t ever consider the changing social mood that drives consumer behavior: it’s a fact that consumers will behave differently over then next decade than the last one.

My advice is not to listen to the parade of pundits who have been wrong on housing for so long. And, instead, pay more attention to the people who have generally been right the whole time.

If you are considering buying or selling a home in the near future, pay attention to people like CR, Mish, Barry, Ben Jones, Tim Iacono, and Yours Truly.

And there are certainly some reasons to be very concerned.

I’ll have my 2012 forecast out soon.

(Hint: things aren’t getting better in 2012. It’ll be a continuation of the last, sad six months)

5. Elsewhere Today:

enhanced buzz wide 16942 1322857259 92 Daily 5: Consumers More Optimistic About Home PricesThe 45 Most Powerful Images Of 2011 – BuzzFeed

As far as we know our igloo is safe for tonight. – Occupy Anchorage

The Income Inequality Boom: It’s Real and It’s Everywhere – The Atlantic

California and Nevada join forces in mortgage probe – LA Times

Anxious Greeks Emptying Their Bank Accounts - Spiegel

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About Greg Fielding

I am a longtime real estate agent who has pretty much seen it all during the housing boom as bust. With experience in selling high-end property and low-end foreclosures, raw land, short sales, development work, apartment buildings, and working with investors, I bring a well-rounded perspective to my work.I also have started to do some paid real estate consulting. If you have questions or just need some good real estate advice, book an appointment at http://whattodorealestate.com/In addition to selling real estate, my insights have been featured in The New York Times, The Big Picture, and regularly on Patrick.net. I have also done consulting work with ForeclosureRadar.Starting my career, in 2003, I have sold homes throughout Alameda and Contra Costa counties, specializing in Danville, Alamo, Blackhawk, San Ramon, Dublin, Pleasanton, Walnut Creek, Lafayette, and Orinda. I live in Danville with my three kids.


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