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The 10 Best U.S. Housing Markets 2013
The percentage of Americans optimistic about the U.S. housing market has reached levels not seen since rumblings of the financial crisis began.
A new Rasmussen Reports national survey found 37% of homeowners believe the value of their home will increase in the next year – thehighest since September 2008.
And 58% of Americans believe their homes are worth more now than when they bought them. That's the highest percentage believing this since fall 2011.
Is the Housing Market 2013 Being Propped Up by Wall Street?
The housing market 2013 is showing signs of improvement from last year – but there's reason to believe this recovery isn't sustainable.
Home prices and sales have been climbing, fueling optimistic outlooks for the rest of the year – but mortgage lending hasn't risen by a similar amount.
That's because it's not families or new home buyers driving the housing market rebound in 2013. There's another major buyer moving markets. And if that buyer stops purchasing homes, this "recovery" could lose its steam.
We caught up with Money Morning market expert Shah Gilani, who in the following interview explained this development in the 2013 housing market.
Here's Another Troubling Sign America is Circling the Drain
Don't blame yourself if you missed this tidbit last week…
On Thursday, the Consumer Financial Protection Bureau hit the nation's four largest mortgage insurers with a total of $15.4 million in fines for "allegedly" paying kickbacks to lenders to steer business their way.
Of course, they didn't have to admit they did it, and therefore, they didn't do what they were fined for.
Back in the summer of 2009, the Inspector General of the Department of Housing and Urban Development handed the Justice Department evidence that laid bare a scheme by lenders (the usual suspects: Citigroup, Wells Fargo, Countrywide, and so on) to get kickbacks from mortgage insurers for making borrowers – who had to buy mortgage insurance – purchase coverage from those companies kicking back profits to lenders. In the industry, it's called "forced placement"
Who did what here?
The Secret Behind the Housing Market "Recovery"
U.S. home prices climbed 10.2% in February, the biggest year-over-year gain since March 2006.
The data seemed to support that a housing market recovery is alive and well – or, is it?
Even though buying is up, banks aren't handing out mortgages at a high enough rate to support this climb.
We asked Money Morning Capital Wave Strategist Shah Gilani to explain what was behind this major housing market change. You might be surprised to learn who's driving the home buying – and what it means for the housing market recovery.
Watch his interview below for the answer.
Are "Wall Street Buyers" Like Blackstone Group Creating Another Housing Bubble?
Where there's smoke there's fire.
When it comes to rising home prices, the question is whether the on-fire price increases are a healthy sign of a housing recovery or a smoke screen masking another investor-led real estate bubble.
The answer is it's both.
So, the real question is: are the two compatible and is the trend sustainable.
The answer to that compound question is "yes" and "no," in that order.
On the surface, everything is coming up roses.
These 5 Charts Prove the Housing Recovery is for Real – and Just Beginning
The housing market has rebounded in a big way, with home prices increasing the most since the housing bubble burst in 2006.
Prices aren't the only indicator pointed toward recovery.
Housing barometers including sales, permits and housing starts have surged well beyond their recession troughs and back into healthy territory – and bullish analysts say there's plenty more room for growth after years of decreased activity.
The housing market activity has been driven by pent-up demand, improved consumer confidence, low interest rates and still affordable prices. And the industry's comeback comes at a time when supply is tight. The inventory of homes available is at near-historic lows, and foreclosures have declined.
Housing Bubble Threat Means Sell These Stocks
The recent rumors of a housing bubble have chilled the recent rise in homebuilder stocks, which were one of the great stories of 2012.
They had underperformed badly for several years in a row as a result of the credit crisis. Foreclosures and other distressed properties were clogging the marketplace and there was very little demand for new homes. Many of the stocks were still losing money and almost all of the homebuilders traded for less than their book value.
But the housing market began to show some signs of improvement during the year. The S&P Exchange Traded Fund (NYSE: XHB) rose by more than 50% during 2012 and many leading builders performed much better than that. Shares of The Ryland Group Inc. (NYSE: RYL) rose by more than 100% while Hovnanian Enterprises Inc. (NYSE: HOV) and PulteGroup Inc. (NYSE: PHM) saw their shares rise by more than 150% during 2012.
We have seen improvements in the Case Shiller Index of housing prices, up 4% through October of 2012. Housing starts in December were at the highest level since 2008. Foreclosures fell to an almost six-year low in December.
The end result of all this positive news is that Wall Street started falling all over themselves in a rush to upgrade and recommend the homebuilding stocks.
But before investors embrace the enthusiastic support of homebuilding stocks it might be best to take a step back and look at the whole picture.
Is This a Recovery or a New Housing Bubble?
Investors have taken comfort from the recent improvement in housing prices seen across the country.
But now the shares are rolling over. Could the relative underperformance of the homebuilders be telling us something?
David Stockman, former director of the Office of Management and Budget under President Ronald Reagan, thinks so.
In an interview with The Daily Ticker, Stockman said, "I would say we have a housing bubble again. I don't think we have a real, organic, sustainable recovery."
Stockman argues that "fast money" is moving into the local real estate markets that suffered the biggest declines in order to "speculate in buy-to-rent for a quick trade."
Stockman thinks that these speculators will be looking to sell out as soon as prices rise sufficiently to give them a specific rate of return and that "they will be gone as quickly as they came."
U.S. Housing Market Recovery Just Rescued 4 Million Homeowners
In further signs of a U.S. housing market recovery, home prices are up – meaning a whopping 33% fewer homeowners are underwater.
When the U.S. housing market bottomed out in 2008, nearly one in six homeowners owed more on mortgages than their homes were worth. That translated to 12 million underwater homeowners.
But the outlook has improved considerably.
That's because home prices, which peaked in 2007, rose 7.4% in November from a year ago, according to real estate firm CoreLogic. That's the largest year-over-year increase since 2006, when the housing industry was nearing its peak.
As home values rose, the number of "underwater" borrowers fell last year by almost 4 million, and that total could drop to 4 million within two years, according to JPMorgan Chase & Co. (NYSE: JPM).
That's good news not only for the housing industry, but for the entire economy.
"For most middle class households, homes are by far their biggest asset," Karen Weaver, head of market strategy and research at investment firm Seer Capital Management LP told Bloomberg News. "So once the housing market starts to recover it helps consumer spending, it helps the whole economy."
Here's Another Genius Mortgage Idea From Washington That Is Going to Cost You
Now here's another good idea from the geniuses that ruin, I mean run, our country.
The Obamarama administration really wants to help homeowners whose homes aren't worth what they borrowed to buy them. In other words, they are "underwater."
A lot of the loans to homeowners that are underwater are owned outright or, at a minimum, insured (more often both) by Fannie Mae and Freddie Mac, the government-sponsored (which means taxpayer saddled) enterprises that the government had to take over when in 2008 they lost on their trillion-dollar bets that home prices would go up forever. Geniuses!
In fact, these geniuses own or insure close to half of all home loans in the United States. Obviously, they like to bet big. But they didn't bet alone. They had betting partners.
The casino was the whole country and the whole system.
The mortgage originators, prime and subprime lenders, banks – everyone was handing out loans because, get this, they wouldn't be responsible for the loans they were making. Fannie and Freddie were buying them all up while the guilty parties would make money as Fannie and Freddie pipelined more products to – guess what – make more loans!
In case you forgot, that's where all the money came from in the whirling dervish derby that fed the mortgage bubble and aided and abetted Alan Greenspan's how-low-can-you-go interest rate policies. I guess we can call him the Big Pit Boss. But I digress…
So, if Fannie and Freddie own your loan and you're underwater, they have been cattle-prodded by the geniuses above them (yep, government geniuses) to let you refinance at a lower rate (lower than the crushing, sucker's rate that ballooned on you).
Because, as an investor (that's what home buying really is – an investment, not a right) you made a go-for-broke bet at the table and forgot your basic math. Math that says, "One, plus the none that I have, equals three, so this is a good bet I can double down on and retire."
What will these geniuses think of next?