I've always found that watching bank stocks is one of the most effective ways to help form an opinion on the overall economy and the housing market in particular.
For the last two years I've described the housing market as glacial, however, the ice is beginning a slow but steady thaw for the following reasons:
Rental prices are surging. Numerous residential housing funds have been formed to buy foreclosed properties and this liquidity will clear the market of many empty homes as people unable to obtain a mortgage will rent them.
The Fed is guaranteeing zero rates to banks through 2014 and that is forcing money into stocks and corporate junk bonds. As these bond spreads narrow, the bond money moves into stocks and forces capital structure bond arbitrageurs to cover shorts and buy stocks.
As stock prices climb, more money trickles down into the economy and everyone from CEOs to the average consumer feels more confident, so they are willing to spend and invest more aggressively.
Being a homeowner is a shared dream for almost all Americans, rich and poor. Potential buyers share a pent up demand for real estate that has been building steadily for the last few years. These buyers have been relegated to the sidelines and forced to sit on the fence because they've faced a volatile economy and a banking industry reticent to make housing loans.
Many savvy investors are long on bank stocks and believe they are going to move big. When that happens the housing market will turn. It may turn slowly, like a supertanker, but turn it will.
Rob Taub frequently appears on Fox News Live & is the Director of New Media at Keller Williams in NYC.
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