Ben Stein's Diary

Bullish on Housing

All the signs point to its pending recovery.

By 3.6.12

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Predictions are hard to get right, especially about the future. So goes the old saying. But I am going to stick my grizzled old neck out and make a prediction: the housing market is about to start a recovery.

It may be agonizingly slow or it may be fast. It may involve back eddies, and rip currents, but it will happen.

How do I know? Well, I don't. It's a guess. But here are some of the good signs.

First, the number of foreclosures is dropping. That means a smaller inventory of distressed homes, which in turn means less supply relative to demand.

Second, the economy is reviving. The employment numbers are getting better fast. The stock market is frighteningly buoyant. There are some signs of faltering in manufacturing, but that index fluctuates wildly.

All of this means more optimism about the future and where there is optimism, housing rallies. Home builders are meaningfully more optimistic.

More important, we have to remember that houses or condos or other real estate are an asset. Their prices have -- in most parts of the nation -- fallen drastically. That means the most likely long-term next move is up -- not down. Assets that have fallen a lot tend to recover. So it has been with housing and will be again. Reversion to the mean is a law of finance. Not a hint: a law. Sometimes violated, but a law.

Most important of all, the great majority of us finance our real estate purchases. For a long time, lenders would simply not lend. There is data on this but I also saw it myself when I was trying to refinance. Rates were low, but lenders simply would not lend.

Now, it's different. Lenders are lending again, and even aggressively going out and looking for customers. This means that a rebounding worker and consumer is meeting up with more flexible, available lenders.

This, if continued, will lead to a housing recovery. Again, there are risks everywhere -- war in the Middle East, higher oil and gasoline prices, a recession touched off by a possibly stunning rise in energy prices. But there are always risks. The central tendencies now are economic recovery, much lower home prices, and easier credit.

These should do it to get housing back on its feet. But again, I could well be wrong.

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About the Author

Ben Stein is a writer, actor, economist, and lawyer living in Beverly Hills and Malibu. He writes "Ben Stein's Diary" for every issue of The American Spectator.