Wednesday, April 25, 2012

Housing Bottom Callers: Zelman, Thornberg

by Bill McBride on 4/25/2012 04:43:00 PM

This is not an appeal to authority - house prices don't care who calls a bottom - but earlier this morning I mentioned a few former housing bears who now think prices are at or very near a bottom. Here is another article with comments from Ivy Zelman and Christopher Thornberg; two of the biggest housing bears at one point ...

From Alejandro Lazo at the LA Times: Housing market may be on rebound at last. A couple of excerpts:

"What are important are sales and inventory, and those are pointing in the right direction," said Christopher Thornberg, a principal at Beacon Economics who was one of the early callers of the housing crash. "I would say that by the end of the year, they should translate into better prices."

Thornberg added, "The recovery is here."
...
"This is not a robust recovery, but I feel confident that we are not sitting here lingering," said [Ivy Zelman, chief executive of Zelman & Associates], who predicts that home prices will end the year up about 1%. "There really is more meat to the bone."
...
"The foreclosure market is turning into a drought, not a wave, and that has resulted in a lack of inventory," said Sean O'Toole, chief executive of the firm ForeclosureRadar.com. "If it continues, it will likely mean that we've either seen a bottom — or have passed a bottom — in prices because of limited supply and still strong demand."
Ivy Zelman, formerly at Credit Suisse, became an internet favorite when she asked Toll Brothers CEO Bob Toll "Which Kool-aid are you drinking?" on the Q4 2006 Toll Brothers conference call.

A couple of key points:
• None of these former housing bears see prices rising significantly any time soon.

• However if prices do stop falling that would impact psychology. Many homeowners with a little negative equity would start feeling that they can work their out from under their debt, and I'd expect delinquencies to fall further. And some potential buyers would start feeling a little more confident about buying. If sellers feel prices will increase a little, some will wait for the "better market", and that will keep inventory down. And lenders will start becoming more confident too. Prices do not have to increase to change psychology, just stop falling!

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