Familiar with the term FOMO? FOMO stands for "Fear Of Missing Out" which has well and truly arrived on the doorsteps of the US housing market -for good reason too. US stocks have rallied hard over the past year, erasing all of their GFC losses and appearing well and truly bought for the near term. With the US housing notching up a further string of positive data leading up to Easter, its not a question of whether US housing is experiencing a broad recovery, its more of a question of just how much of the recovery has already passed, and what does this mean for the continued performance of stock markets? Firstly, any thought of a sustained drop in US equities would first have to see a slowing of gains across the board for housing and housing related assets. -Highly unlikely at this point in time.
For the first time since 2006, all 20 of the US tracked cities moved higher year on year based on the S&P 500 Chase Schiller index, providing further evidence that this recovery is well and truly underway.
US housing has taken a fundamental shift in perceived valuation over the past year. Similar to companies, which shed as much as a third of their value in light of a weaker US economy and tangled mortgage situation, housing is the next cab off the rank, evolving from a state of capitulation, with an oversupply of foreclosed homes and not enough demand to satisfy such a vast offering of inventory, to a dog-eat-dog combination of private and institutional wealth, all vying for a piece of what is now being seen as an undervalued market.
Taking the lead are major investment institutions clambering at foreclosed homes to build multi-billion dollar portfolios of soon to be securtised single family home assets. Blackstone Group bought more than 20,000 homes in 2012 and Colony Capital holds a similar aggressive stance on acquisition. Stopping such a wave of institutional and retail investment would be no easy feat, partcularly considering the deep pockets and allocated capital toward further housing related purchases in 2013. What this means for traders and investors, is the very stocks we have seen outperform over 2012 are likely to continue to do just that. As well as stocks, growth linked commodities such as Copper will also likely follow suit. Lowes, Home Depot, even America's car manufacturers are likely to continue to return capital gains to investors over the next 6-12 months and all of these gains point towards a recovering housing market. There is an overwhelming sense of FOMO from both institutional and retail bidders in the US right now. An undervalued dollar, a recovering economy and a housing industry which so far has underperformed the broader stock market is likely to drive continued gains across major sectors of the US economy, all the while underpinning a sustained recovery throughout 2013.
Staying Bullish On America,