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  • Writer's pictureJeff Matthews

The Best News You Didn’t Read This Morning: Housing is Recovering Faster Than You Think

Energy and basic-materials stocks dragged the market lower as new economic data and rising oil inventories sapped investors’ recent optimism about an economic recovery. —The Wall Street Journal, June 4, 2009

So says today’s Wall Street Journal. And who’s going to argue?

Well, we here at NotMakingThisUp, for starters.

And that’s because whatever the “new economic data” might have been that “sapped investors’ recent optimism” yesterday, it had nothing to do with what’s happening in the real world.

What’s happening in the real world is this: the housing market is recovering, fast.

The following are yesterday morning’s comments from Hovnanian, the once-mighty home builder (280,000 houses delivered, and counting) in which we here at NMTU have no interest except to monitor what is happening in the real world, as opposed to on Wall Street trading desks.

The words are CEO Ari Hovnanian’s, from his introductory remarks. The entire transcript is worth reading, and you can find it at Seeking Alpha (

Now let me get back to the sales trends we’re seeing in the market today. We have seen more then the typical seasonal uptick in sales throughout our second quarter. The seasonal aspect of the pickup in sales is not unusual but its noteworthy that this is the second consecutive quarter that our contracts per community were up year over year….

The contracts per community have shown a positive comparison for six of the past seven months and the comparison has been even stronger during the two most recent months with a 25% and 33% increase in net contracts per community for March and April respectively….

When you look at the MLS data for many markets today you see two positive forces at work. First you see absolute sales numbers have picked up and second you see inventory levels have come down. In some markets you could almost make the case that the month’s supply has corrected too much. Believe it or not, by normal standards there is actually a shortage of homes based on the current sales pace in certain markets including some of the markets that were the most over supplied not long ago. Now, Mr. Hovnanian was quick to point out that part of the improvement has come from California, where a $10,000 state tax credit, on top of the federal first-time buyer credit of $8,000, has had a distinct impact. And of course, prices are down, which is why the market is clearing.

Finally, he was also quick to point out that rising rates could nip a recovery in the bud.

But interestingly enough, one of the fastest-improving markets was outside the Formerly Golden State, in one of the many markets once in contention for the label “Ground Zero of the Housing Bubble.” The first reader who correctly identifies the market being described by Mr. Hovnanian wins nothing but recognition on these virtual pages:

At a five months’ supply this market looks a lot better than it did a year and a half ago when it had almost a 25 months’ supply. It’s been a few years since the word “shortage” appeared in the same sentence as the word “homes,” at least in America.

And that, we think, is the best news you didn’t read this morning.

Jeff Matthews I Am Not Making This Up

© 2009 NotMakingThisUp, LLC

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business in any way: such inquiries will not be responded to. This content is intended solely for the entertainment of the reader, and the author.

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