The US economy will avoid recession as the housing market begins to recover this spring, according to billionaire investor Sam Zell.
Speaking on "Squawk Box" this morning, Zell attributed much of the current economic troubles to fear-mongering and politicking by Democratic presidential contenders Hillary Rodham Clinton and Barack Obama.
"Obviously what we have going on is an attempt to create a self-fulfilling prophecy," said Zell, chairman of Equity Investments Group and owner of the Chicago Cubs, Chicago Tribune, Los Angeles Times and other companies. "We have two Democratic candidates who are vying with each other to describe the economic situation worse.
"The reality is that if you live on Wall Street and you're in the credit markets the world couldn't be worse. If you're a farmer and you're getting $25 for your wheat, you're having a great time. If you're a CEO and you've got a balance sheet that's bullet-proof, you're in a great position. This whole thing is way out of control, way out of hand."
Zell said that although he doesn't try to pick bottoms in markets he believes housing has hit its nadir and will turn around this spring as inventory clears out.
What brought all this on? Bernanke was testifying before a Congressional committee today, saying he believed we still had more sluggish economic times ahead. No doubt. We didn't get into this overnight, and it's a fantasy to think we can come out overnight.
Add to the hype, while driving down the road, a local radio broadcast blares out the news that the "new" home sales are down for the third month in a row. It's enough to make a lesser optimistic girl, who makes her living by believing in the value of real estate (not only as a home, but an investment), slash-your-wrists depressed.
But not me. Instead the first thing that crosses my mind is... "well duh! It's winter!" Contractors aren't as likely to be finishing construction during these months because of the weather factor. Add to that, the traditionally hot buying season is spring thru late summer. So it's right about now that contractors, brave enough to buck the odds by starting construction projects in the middle of the lenders tightening credit criteria, would be furiously building and polishing off the homes for a spring/summer sale target date.
In fact, I wonder about these stats. Do they even check for the amount of building permits pulled to compare to the number of new construction homes sold? They leave that little ditty out, I see. Strikes me as a more logical analysis if they compare how many homes were finished and ready to sell - with final occupancy inspections completed - and weigh that against how many permits pulled, and then factor in the sales. But what the heck do I know, right?
This simple logic by a non-economic major (that would be me) is supported by today's article at the National Association of Home Builders website.
“The falloff in new-home sales in January largely reflected a return to more normal weather conditions, following the weather-related increase in sales late last year,” said National Association of Home Builders (NAHB) Chief Economist David Seiders. “NAHB’s monthly surveys actually have been showing modest improvements in builders’ confidence regarding home buyer demand since last September.”
“The new-home sales statistics continue to show a lot of month-to-month volatility, but the pattern has been fundamentally flat since the middle of last year,” Seiders said. “The market is being supported by solid gains in employment and personal income, as well as by a historically low interest rate structure, and we expect those supports to be well maintained as we move forward. Furthermore, builders continue to use both price and non-price incentives to bolster sales and reduce inventory,” he added.
Like most strategies, daily or monthly events are merely a snapshot in time of a gradually rising or falling trend. And tho the news may sound dire that day when you turn your radio dial, or channel surf news, I for one think that Zell is spot on.
And, ya know, the man has alot of financial proofs that his instincts are right!
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