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Housing Bottom: We're There Right? Not So Fast

Monday, 14 Jan 2008 | 12:57 PM ET

When I heard the news this morning, I thought it was a breakthrough: the first piece of news signaling that bottom to this housing market.

An analyst at Credit Suisse upgraded the home-improvement sector. Fantastic. If they want you buying the likes of Lowe’s and Home Depot , then they must believe that homeowners are going to buying a lot of stuff at those same places, which of course means that people are regaining their faith in their homes. You don’t put money into something that you think is losing value, am I right?

Not so fast. The upgrade is based on “current panic” over the stocks and a belief that most of the bad news in the housing market is already priced in. The firm says the upgrade is based “on valuation and early cycle as opposed to any confidence that things will not get worse.” Well that just makes me feel real good about things.

The analyst also said that when a recession actually hits, home improvement retailers tend to perform better than other retailers. I guess when people feel like they’re not going anywhere they tend to want to improve where they are.

In fact, one survey projects that home improvement spending will increase 13 percent this year (the survey was done by a contractor rating service). As the Fed continues to lower rates, home equity lines become cheaper, so using your home as an ATM becomes, once again, a bit more attractive. At least something in housing is improving.

Questions? Comments? RealtyCheck@cnbc.com

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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