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Housing Index Revisited

Posted by Larry Doyle on March 18, 2009 1:11 PM |

A week or so ago, I introduced two indexes that track the outlook for housing in our country. The S&P/Case-Shiller Index is released on a monthly basis. The ABX is an index that can be traded daily by institutional money managers and thus allows them to reflect their opinions on the outlook for housing. The ABX is a very broadly defined index that tracks housing by the underlying year of origination of the mortgage.

Yesterday, the monthly housing starts number surprisingly jumped 22%. The government program TALF (Term Asset-Backed Lending Facility) to restart the consumer finance markets is set to launch next week.  Hopefully that program will bring added liquidity to our consumer finance markets and support housing as well. The mortgage modification program to support housing is underway.

How are institutional investors reacting to these developments? Are they becoming more sanguine about the prospects for housing and thus buying this ABX index?

Anything but! The ABX index is making new lows. Our friends at 12th Street Capital share with us that most of the different classes of this index are down approximately 5% today and are making new lows in the process.

Unless and until we see stability in housing, in my opinion, we will not see real stability in the economy and our markets.


  • TeakWoodKite

    What is very frustrating is the fact that being underwater but paying my way, I am unable to “qualify” for a better rate on the house.

    The simple act of making a loan is a multplier.
    The housing market will rebound only when all the equity in the market is gone.

  • Larry Doyle

    TeakWoodKite…I empathise. It is a shame that mortgage originators do not fully and honestly underwrite a credit and then at the bare minimum offer a mortgage based on that credit review and mortgage appraisal. Allow the remaining balance of the primary mortgage to become a second.

    While the government is talking up all of its’ programs, none of them work for people like you. I wholeheartedly agree that this is an opportunity lost to create a real multiplier in the economy.

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