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3 Myths About the Housing Sector

Three widely mentioned arguments against a housing recovery don't stand up to scrutiny, Bank of America Merrill Lynch Senior Economist Michelle Meyer said Wednesday.

On CNBC's "Fast Money," she said that while investors were an important component of the improvement in housing prices across the United States, they accounted for only 22 percent of sales.

"But on balance, we're seeing a return of primary-home buyers," she said, adding that individuals held higher expectations and were helping to lift prices of non-distressed properties.

Secondly, Meyer said that the idea that the Federal Reserve's monetary policy was creating a bubble in housing was false.

"I don't think we're in a bubble," she said. "I really see very little evidence of that."

Meyer took issue with the idea there was a bubble forming.

"I mean, one of the criteria for a bubble, you need to see overvaluation. Clearly, that's not the case. Prices are still modestly undervalued relative to income or rent," she said. "And you need to see excess leverage, and by no means are we in that environment. A good share of purchases are still all-cash; the credit conditions are still quite, quite tight."

Lastly, home construction costs were not likely to stop the improvement.

(Read More: 'A Mixed Bag' for Banks: Hedge Fund Pro)

"This is an obstacle for home building, and I think it's one the reasons that there's some ceiling to how much further gain we can see in terms of total construction, but it's not something that will derail it," she said.

With low housing inventory and increasing sales prices for homes, Meyer added, builders would be able to pass on some of the added costs.

"It's a headwind, of course, but it does not prevent home builders from adding to construction, so I would say that's fiction, too," she said.

Trader disclosure: On May 8, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Steve Grasso is long AAPL; Steve Grasso is long ASTM; Steve Grasso is long BA; Steve Grasso is long BAC; Steve Grasso is long GDX; Steve Grasso is long GOOG; Steve Grasso is long LF; Steve Grasso is long LNG; Steve Grasso is long MHY; Steve Grasso is long MJNA; Steve Grasso is long PXD; Steve Grasso is long NVIV; Steve Grasso is long PFE; Steve Grasso is long S; Steve Grasso is funds long EMC; Steve Grasso is funds long MSFT; Steve Grasso is funds long HPQ; Steve Grasso is funds long NEM; Steve Grasso is funds long ZNGA; Josh Brown is long XLU; Josh Brown is long XLF; Josh Brown is long WMT; Josh Brown is long TGT; Josh Brown is long GOOG; Karen Finerman is long AAPL; Karen Finerman is long BAC; Karen Finerman is long C; Karen Finerman is long JPM; Karen Finerman is long TGT; Karen Finerman is long GOOG; Karen Finerman is long M; Karen Finerman is long FINL; Karen Finerman is short SPY; Karen Finerman is short MDY;

For Colin Gillis
Investment banking (next 3 months): BGC Financial LP and/or its affiliates, expect to receive, or intend to seek, compensation for investment banking services within the next three months from all of the companies referenced within this report; Lead or Co-manager: BGC Financial LP and/or its affiliates, has not acted as lead or co-manager in a public offering of equity and/or debt securities for Microsoft within the last 12 months. BGC Financial LP and/or its affiliates has not received compensation for investment banking services in the last 12 months from Microsoft; Lead or Co-manager: BGC Financial LP and/or its affiliates, has not acted as lead or co-manager in a public offering of equity and/or debt securities for Yahoo within the last 12 months. BGC Financial LP and/or its affiliates has not received compensation for investment banking services in the last 12 months from Yahoo.

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