The Best of Kass
Among his posts this week, Kass discussed why housing data bode well for a recovery, how he is investing to bet on such a recovery, and why he is increasing his short position in bonds.
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Pending Home Sales
Originally published on Thursday, April 26 at 10:43 a.m. EDT.
March pending home sales were better than expected, rising by 4.1% as compared to a 0.4% increase in February and vs. expectations of a 1% bump.
The year-over-year change was up 10.8% (compared to a small base a year ago).
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This is the highest reading in two years, and pending home sales typically foreshadow existing-home sales by several months.
A durable multiyear recovery in residential real estate markets is central to my thesis of a self-sustaining U.S. economy and why I am short bonds.
The observations I have recently made and the national data on housing are confirmation of an industry upturn, which is supported by record housing affordability, a compelling home ownership vs. rent equation, the beginning stage of clearing shadow inventory, underproduction of new homes since 2008, pent-up demand as demographic/household formation trends continue, an improvement in the jobs market, improving confidence indicators and a slow easing up in mortgage lending.
The U.S. home market is splintered and bifurcated, which represents to this observer that a recovery in home prices is imminent.
The importance of the housing industry cannot be overstated. Consumer confidence and spending has been held hostage, to some degree, by a sharp drop in home prices, which is now coming to an end.
At the time of publication, Kass had no positions in securities mentioned.
How to Play a Recovery in Housing
Originally published on Friday, April 27 at 12:21 p.m. EDT.
Over on Columnist Conversation, Ken "IBD Man" Shreve suggests some housing plays.