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HOUSING - OBJECTS IN THE MIRROR
Nobody wants to believe that the housing market has turned.

If you are just generally bearish, it's centered on the consumer's inability to buy anything.  The theory goes that the consumers are not going to go out to eat, buy new clothes and certainly not going to buy a new home.    Even the greatest investor on the planet Warren Buffett said this weekend, "There's no sign of any real bounce at all in anything to do with housing, retailing, all that sort of thing."

Today, the National Association of Realtors, said the Pending Home Sales Index, (a forward-looking indicator based on contracts signed) increased in March by 3.2% to 84.6 from 82.0 in February.  Surprisingly, the index is 1.1% percent higher than March 2008.

While two months is not a trend, what has occurred over the last two months could be the leading edge of turn in the housing market.  As we said in our 4/24/09 post - HOUSING - Which way is up? -  affordability conditions is at a 40-year high when looking at median home prices, mortgage rates, monthly mortgage payment, and median family income.   In addition, a government $8,000 tax credit has the ability to increase buying power where there are special programs offered that allow buyers to use it as a down payment.

It was just two weeks ago that we learned the sales of new homes are also showing indications that the housing decline may be near a bottom.  The Research Edge MACRO process is built around changes at the margin.  While Mr. Buffett and others might not see what is happening on the margin to the housing market, the turn is gaining momentum. Looking at the market 2.5% move today; market prices don't lie, people do. 

The market is confirming that the US Housing bottom will be in the rear view soon.

Howard Penney
Managing Director

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