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The Associated Press – Homebuilder optimism rises for 5th straight month
Builders’ sentiment rises for 5th straight month, to highest level since in nearly 5 years
U.S. homebuilders are gradually growing more optimistic about the depressed housing market and believe homes sales could pick up sharply when the spring buying season begins. The National Association of Home Builders/Wells Fargo said Wednesday that its builder sentiment index rose for a fifth straight month in February to 29, up from 25 in January. The index has climbed 15 points since September and is now at its highest level since May 2007. Builders have generally become more hopeful during that stretch about current sales, sales six months out and foot traffic, the report shows. Even with the brighter outlook, the industry has a long way to go. Any reading below 50 indicates negative sentiment about the housing market. The index hasn’t reached 50 since April 2006, the peak of the housing boom. A key reason homebuilders are more optimistic is they are seeing more people express interest in buying a home. And rising interest has occurred alongside other improvements that suggest the troubled housing market could pick up after four weak years.
The Wall Street Journal – Toxic? Says Who? Taste For ‘Subprime’ Returns
Investors’ belief that the worst is over for the U.S. housing market is fueling renewed interest in once-toxic mortgage bonds that were at the heart of the financial crisis. Prices of some distressed bonds backed by subprime home loans—those issued before the crisis to borrowers with sketchy credit histories—have chalked up double-digit percentage gains this year, with one prominent market index rising 14%. The rally has drawn investors back to a corner of the credit markets that was pummeled from 2007 to 2009 and has been volatile since. The latest upswing has some money managers setting up investment funds dedicated to buying beaten-down mortgage bonds, hoping to reap fat yields while waiting for the housing market to turn. The recent resurgence in battered mortgage bonds that were left for dead during the crisis reflects how investors’ appetite for risk is returning, even after many banks and hedge funds lost money last year on similar assets.
Source: Bianco Research