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Everything has a price and housing is finding a home!

Increased access to credit lowers borrowing costs and the significant decline in prices are making home ownership more affordable. Today, sales of previously owned homes increased 5.1% in February to an annual rate of 4.72 million from 4.49 million in January. Also, the National Association of Realtors said today the median price declined 15.5% year-over-year; and distressed properties accounted for 45% of all sales.

The increase in home sales kept the months’ supply of unsold homes on the market at the end of February at 9.7 months; the same as in January. Every region in the country showed an improvement in sales and the median listing price rose in California in February for the first time in three years.

Today’s housing numbers support our view that the worst is over and 2Q ‘09 will mark a positive inflection point for the housing market. We have been very clear about our view on the consumer (think M.E.G.A) and the consequences of Chairman Bernanke’s actions that a weak US $ will inflate assets domestically where Americans need it most – in their 401ks and home values.

Trading intraday here at 801, the SP500 has re-flated +18.5% since the March 9th low and now housing is making a bottom. Stock market prices are leading indicators, don’t forget!

Not surprisingly, the industry is still very cautious. Ara Hovnanian, CEO of Hovnanian Enterprises, recently said, “We expect demand for all homes, both new and existing, to remain far below normalized levels.” The historic collapse in the real estate market raises questions about whether the Real Estate companies will ever again see the pace of sales it did a few years ago. The easy answer is no! The death of the consumer credit cycle will mean that there is a “new normalized level” of sales.

Just remember, don’t rely on the same corporate exec that missed housing’s top lead you to believe they know where we’ll bottom. They don’t do macro.

Howard Penney
Managing Director