Home Prices (excerpt)

I predict that in the next 18-24 months, there will be no negative equity in America’s real estate market. Yesterday, we learned that the S&P/Case Shiller composite index of 20 metropolitan areas climbed 10.9% y/y during March, the biggest increase since April 2006, just before prices peaked in the summer of that year.

The 12-month moving average of the median existing single-family home price is up 10.5% since it bottomed during February 2012. It is still 18.9% below its record high during July 2006. Interestingly, the median price of a new single-family home recently rose to a new all-time high! No wonder that housing-related stocks continue to outperform the S&P 500. Consider the following:

(1) The 5/16 WSJ reported that a group led by billionaire hedge-fund manager William Ackman is in contract to buy a penthouse apartment in Manhattan for more than $90 million. Citadel’s Ken Griffin has bought four adjoining properties in Palm Beach, Fla. for a total of nearly $130 million, adding to a $15 million buy he made in November of a penthouse apartment in Chicago that he is combining with the floor below.

(2) On Monday, the WSJ reported that “[i]n California, the number of homes sold in recent months that had been flipped--or bought and resold within six months--has reached the highest levels since late 2005, according to PropertyRadar, a real-estate data firm. About 6,000 homes have been flipped in the state this year through April, or more than 5% of all homes sold statewide….Six of the 10 largest price gains in major U.S. cities over the past year have been in California, according to Zillow. In April, home values rose by 25% from a year earlier in San Jose, San Francisco and Sacramento, and by 18% in Los Angeles.”

(3) On Tuesday, the “Greater New York” section of the WSJ reported: “House prices in the New York City suburbs, after a six-year roller coaster ride in which they lost roughly a quarter of their value, are climbing again….Buyers who have been waiting have jumped back in, creating bidding wars for many desirable properties, brokers say. The number of new contracts signed is up; some homes are selling in a few days, often with multiple offers.”

Today's Morning Briefing: Gilded Age. (1) Edging away from rational toward irrational exuberance. (2) From fairly valued to overvalued this summer? (3) New record highs for forward earnings. (4) As yields go up, P/Es go down according to Rule of 20. (5) The Fed’s MAMU dilemma. (6) End in sight for negative home equity. (7) Moody’s is less depressed about banks. (8) Consumers are happier. (9) Another Gilded Age already? (10) Gatsby’s bling. (More for subscribers.)