After the housing bubble burst there was sympathy for first-time home-buyers who had been enticed in by the easy loans and rising home prices and wound up in trouble.
But investors in single family homes came to be castigated as 'flippers', 'suckers', and worse. They had played a significant role in creating the bubble, signing contracts, often on multiple homes, making virtually no down payments, not intending to ever live in or even rent out the homes, but to simply flip them for a quick profit. Builders could hardly keep up with demand for a while, but wound up with wastelands of partially completed developments and condo projects, especially in the sun-belt states.
That 'investor' activity resulted in much of the subsequent pile-up of defaulted mortgages, foreclosed properties, and record high inventory of unsold homes that has had the housing industry in a five-year depression.
But for the past year, real estate speculators and investors have been playing a perhaps heroic role by diving back in on expectation that the real estate market is bottoming.
They may even be single-handedly creating the conditions themselves that have them optimistic.
Recent housing reports have been encouraging. Although home sales stalled again in June, on average they've been rising for most of the year. Home prices have been inching up. Foreclosures are down fairly sharply. The inventory of unsold homes has dropped dramatically. The recent employment report showed that homebuilders added 5,800 workers in July. That's about the same number of monthly hires they were adding during the bubble years of 2005 and 2006. (Of course, the big difference is that then they were adding to already record high levels of construction employment, while now they are hiring back from record levels of unemployment in the industry).
The interesting and perhaps unnoticed aspect of all this is that it is investors and speculators who have been providing much of the activity for more than a year now.
An April report from the National Association of Realtors showed that the number of owner-occupied homes fell 15.5% last year, while the number of investor-owned homes surged 64.5%.
That situation has continued, with sales reports this year showing that 20% to 25% of reported monthly sales of both new and existing homes have been to bottom-fishing investors, swooping in to buy at what they expect to be low prices.
The NAR reports that 41% of investment buyers bought more than one property, nearly half say they intend to buy another property within two years, and they intend to hold the properties for an average of five years.
It has been working out well for them so far. Desire for home-ownership, the age-old American dream, has plunged. Demand for rentals is up, which has rental prices rising.
It's not yet clear whether speculators have got it right or have gotten too optimistic too soon.
New home sales plunged a big 8.4% in June, while existing home sales fell 5.4%.
Realtors say the stumble was only a one-month glitch and demand remains strong.
But bears on the housing industry, who believe the bottom will not be seen until 2014, point out that half of would-be traditional home-buyers can't qualify for a mortgage even with rates at record lows, and that the banks are sitting on a huge backlog of homes with delinquent mortgages they will be foreclosing on, and dumping on the market in coming quarters, sure to push prices into another decline.
Another round of monthly housing reports begins next week, with the release of the Housing Market Index, which measures the optimism of the nation's home-builders, on Wednesday, Housing Starts on Thursday, and new and existing home sales the following week.
Those will be important reports to keep an eye on, not just for the housing industry, but for the overall economy.
The two main driving forces of the economy historically have always been the housing and auto industries. That stands to reason since they have long tentacles that provide employment for so many peripheral suppliers and businesses that feed off whatever success they have.
It has long been my opinion that it's a mistake to watch the employment picture for signs of a recovery. Jobs are a lagging indicator. Employers do not hire more workers until the economy has already improved to the point where they can't handle their increasing sales and activity without hiring more help.
The leading indicators for the economy (in both directions) are housing and autos.
Auto sales have been picking up for more than a year now, which has helped. But autos alone can't carry the entire load.
Apparently investors and speculators, providing more than 20% of home purchases have at least prevented housing from sinking lower that it would have, and may be creating a bottom that will encourage more traditional buying.
Let's hope so. The latest housing reports beginning next week should provide important evidence one way or the other.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.