Mortgage Outlook Part II

We continue our series of the mortgage outlook for 2012 with a report from another great in the mortgage business Bill Fisher. Bill takes a more optimistic outlook than the author of our first in this mortgage outlook series. Here’s Bill’s take:

The New Year, 2012, is tip-towing stealthily into view, afraid we might want to throw it out before we’ve even experienced a bit of it. The fine economist Nouriel Roubini, who has rarely seen a dour forecast he didn’t like, is already mumbling incantations on the theme of another Recession. Not a Great Recession, perhaps, but a serious one.

But that is view of the future relatively predictable, and though he may prove right—as he often does—there are other voices that have very recently hazarded very different views. And they’re worth a listen.

Notice, for example, this pleasant gem from Stephen Kim, an analyst at Barclay’s Capital: “It has become increasingly apparent to us that the pieces for a housing rebound next year are beginning to fall into place.”

Whoa! Did someone actually say such a thing? Yes—and more analysts are joining the festival of optimism about the real estate market.

“‘With the exception of really hard-hit markets, the vast majority is ready to turn around,’ adds Jerry Howard, president and CEO of the National Association of Home Builders, NAHB. ‘The Washington, D.C., area is not only ripe for recovery, they need to start building units.’”

Indeed, by most reports, the construction industry will have a lot of catching up to do if the beginning signs of sustainable recovery play out well.

So I was writing about this yesterday and I opened my issue of The Wall Street Journal. Here’s what I found:

“Big money is starting to wager on housing. Hedge funds run by Caxton Associates LP, SAC Capital Advisors LP, Avenue Capital and Blackstone Group LP have been buying housing-related investments, betting on a rebound. And formerly bearish research firm Zelman & Associates now predicts a housing pickup, as does Goldman Sachs Group Inc. Other investors seem to be making the same bet. Shares of home-builders are up nearly 32% since the end of the third quarter, as measured by the Dow Jones index tracking those shares, topping a nearly 10.5% gain for the Standard & Poor’s 500.”

This is pretty serious stuff. It walks like a building recovery, it talks likea recovery…from self-fulfilling prophecy alone, it may prove to be a recovery that will gain in force and even stand up to the constant worries and doubts spawned by European politicians and banks, America’s partisan inaction, and now, the possibility that China’s economy may flatten for a time.

“‘We turned bullish on housing. A rebound is coming,’ says Andrew Law, chief investment officer at $10 billion hedge-fund firm Caxton. He expects that home prices and construction will rise in 2012.”

The inevitable caveat: Don’t expect this recovery to look the way recoveries have generally looked in the past. We’re not about to be swept into another boom that takes home sale figures skyward. The recovery will most likely remain rather slow and cumbersome when compared to what passed for “normal” in boom years (you know—when high-tech stocks, subprime mortgages and other oddities
stoked the markets’ fires).

But perhaps we can bring out the champagne at last. The experts are celebrating the likely return of a market that makes more sense, that doesn’t depend on government programs to sell its homes, and that allows everyone from builders to construction workers to mortgage loan officers to real estate professionals to make an adequate living once again. Cheers!

Bill Fisher

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