This worries me… not!
by Peter Switzer
Sure there are lots of things out there to keep us cautious about investing, and by the way that’s a good thing, but the one thing that worries me is the US housing sector — it just can’t heal itself — at least for now.
However, I think I can see some promising signs but it’s not coming from the housing sector!
Overnight the latest home price survey from S&P/Case Shiller was released and it doesn’t make good reading. However, it was not wrist-cutting stuff.
In the top 20 cities for real estate, house prices were down 3.1 per cent for the year to January and the trend downwards is picking up, the experts tip.
“Keeping with the trends set in late 2010, January brings us weakening home prices with no real hope in sight for the near future,” said Standard and Poors' David M. Blitzer, as reported by CNBC. "The housing market recession is not yet over, and none of the statistics are indicating any form of sustained recovery. At most, we have seen all statistics bounce along their troughs; at worst, the feared double-dip recession may be materializing."
And what’s more of a worry is that the S&P/Case Shiller number is only 1.1 per cent above the low of April 2009.
By the way, this is in a country where you can get a 30-year fixed home loan for 4.7 per cent!
Right now forced sales brought on by lenders is a third of the market and that would not and will not help prices but maybe this is the cleansing process needed to help recreate a proper housing market again.
American property situation
Yesterday I listened to one of America’s best property sales guy — David Knox — who was out speaking to real estate agents for the Real Estate Institute of Victoria. Apart from being insightful on how to sell property he revealed his own personal experience.
He hails from Minneapolis but he had three townhouses in Palm Springs. He admitted that many property owners in the US are down about 40 per cent on what they paid or what their houses were worth and there’s been a lot of hanging on waiting for a price recovery.
He admitted he was sick of waiting and for personal reasons he and his wife wanted to move to a new house, so he was going to cop the loss. He made the point he still buys at a low price and when prices eventually come back, he will regain a lot of his capital loss.
The cleansing process
This is the cleansing process and it will coincide with a better jobs market in the US. The most recent quarterly report on employee confidence from Glassdoor.com revealed that 73 per cent had exit plans form their current job!
The survey also found that 40 per cent thought they could find a new job if it became essential in the next six months. That’s a rise of five per cent in one quarter and this confidence trend has been heading up for 18 months.
These sorts of indicators suggest an improving jobs market, which the raw employment data is pointing to and when this really becomes entrenched this will make more Americans, like David Knox, face up to their short-term capital losses and the cleansing process in the housing sector will pick up.
Timing is everything
The interesting issue to consider is that when markets gradually gain ground in the early and middle parts of the cycle, it’s generally in the context of a number of nagging doubts that keep a lot of investors on the sidelines in safer investments.
Gradually, these concerns, such as a slow repairing US jobs market and a very weak housing sector, go away and more people join the stock market and a good rally becomes a boom market. Ironically that then brings us closer to the time that we should be thinking about reducing our exposure to shares as the eventual market crash always happens when most investors think it’s the right time to invest.
Timing is everything in life and it goes double for investing.
Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
Published on: Wednesday, March 30, 2011
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