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.

Corporate Welfare for Homebuilders?

The larger issue -- why do we need national home builders? The don't export, they actually use less labor than local contractors, their previous access to cheaper credit led to speculation and they are in part to blame for the housing crisis. Simply put, national home builders do nothing for the economy that cannot be replaced by local contractors much more in touch with local conditions and local banks. Notice the word local. That being said, if they go bankrupt, their assets will be dumped on the market even faster than if they receive this tax rebate.