Real Estate Sector Handicapping of Early Lenders Not Surprising

June 07, 2012 / Russell Legato, Residential Property Analyst

Not everyone agrees the U.S. housing market has bottomed out. But, many firmly believe the industry is progressing into recovery. Thus, real estate sector handicapping of early lenders not surprising, as might have been expected.

Real Estate Sector Handicapping of Early Lenders Not Surprising

One such sign is that lumber is selling and that means builders need it for constructing new houses. Timber REITs gained 7.6 percent in 2011 and have already gained 9.6 percent in just half of 2012.

Timber REITs gained 7.6% last year and have gained about 9.6% so far this year.

If construction of new houses coincides with population growth, that will be sufficient to contribute to the real estate industry’s recovery. From 2005 to 2008 the price of lumber went down by 34 percent. However, those prices have been increasing since. But, they are still 20 percent lower than peak prices.

Fortunately, demographics indicate much more construction will take place in the near future. Since 1990 a large group of potential home buyers were born.

In households headed by a person between 25 and 44 years of age, there was a 3.5 million decrease while the housing crisis was in full swing. Multiple families moved in together, while some lived in their parent’s basement.

These factors will contribute to a sustainable growth in the housing market. Solid demand is indicated for at least five years. Interest rates remain low and some still hesitate to buy because they suspect they may go a little lower before moving back up.

There have been radical changes. For example iShares ETF was lower last year by 9 percent. It has gained approximately 34 percent in the first half of 2012.

Investment opportunities are available at the prices currently in effect.

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