Société Générale analysts are mincing no words: The US housing market has bounced off its bottom. And that’s something that will affect everyone from well-heeled private equity investors to working schmoes who can swing a hammer. They write:
Rising home prices imply that the deflationary dynamic that has plagued the housing market and the broader economy is now over. Until now, the rebuilding of tangible wealth has been accomplished largely through the liability side of the household balance sheet, i.e. via defaults and debt repayments. Not only is this type of deleveraging painful; it also tends to reinforce the economic weakness. Going forward, we believe that balance sheet repair will become a lot easier as rising home prices lift asset values and wealth positions. This trend has already begun, but will continue for some time.