Michael Shulman

Pending Home Sales Better: Is it Time to Buy Homebuilders?

I find the optimism amusing -- given the low base, existing inventory and the gigantic inventory overhang that is building. There are nineteen million vacant housing units in the US - only six million are listed. Banks are sitting on more than 600,000 homes they gave foreclosed but not listed, I am assuming they do not like current prices. Mortgage re-sets of funky mortgages - options ARMs and ALT-As - do not peak until mid- 2011 and these have unreal default rates -- Goldman Sachs puts the default rate for option ARMs at more than 60%. And defaults mean more foreclosures. Inventory will not stabilize until 2012 -- maybe -- this is a statistical anomaly. A green shoot. I have twin boys, and when they were infants you could see green shoots coming through their diapers -- seems to me they are the same thing.