US Housing has Bottomed…or Has it?
- Posted by Robert Sinn
- on February 22nd, 2012
I have personally seen and heard of numerous anecdotes that help to add weight to the argument that a bottom is in for US housing. However, it may be a “bathtub bottom”, certainly not the V-shaped bottom that we have witnessed in equities over multiple time frames recently. In Delray Beach, there are several developments that were built during the bubble period of 2005-2006 which had virtually zero transactions between late 2008 and 2010 – recently buyers have reemerged, the market has begun to clear, and prices have stabilized.
Over the weekend I had the opportunity to visit a close friend who is a real estate investor focused on single family residential in Daytona Beach, Florida. He had some extremely insightful observations:
- Single family RE in Daytona has essentially reached depression type of levels with cap rates north of 20% being quite common.
- 2012 is the “year of the short sale”…banks are now willing to pay commissions and negotiate – market is functioning once again as banks are willing to clear out inventory.
- Daytona property values are back to 1998-1999 levels
- Bank of America ($BAC) owns at least 1/3 of single family RE in the Daytona area with many mortgagors having not made a mortgage payment in more than a year. Those who continue to proclaim that BAC is cheap on a price/book value basis should seriously consider that much of BAC’s balance sheet is not properly marked to account for non-performing loans (some of which have not been performing for more than three years).
- Regions Financial ($RF) which had previously been unwilling to move its REO inventory has begun to clear its inventory in the past few months.
- Several large investors (REITs) have recently completed large transactions ($10 mil+) for apartment complexes in the Daytona area.
- My friend says that the best catalyst to nail in the final bottom for housing will be nothing more complex than the simple passage of time. $JPM CEO Jamie Dimon agrees: “We’re adding 3 million Americans a year. In the next 10 years, we have 30 million more Americans. Those 30 million Americans are going to need 15 million homes, or something like that.”
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Robert Sinn is a professional trader and market analyst who focuses on multiple asset classes including equities, futures, options and currencies. He integrates fundamental and technical analysis. More »