A Housing Bull and Bear Clash on the Outlook

Two widely followed titans of housing battled on Surveillance this morning -- bullish Corcoran Group founder Barbara Corcoran and bearish Zillow Inc. Chief Economist Stan Humphries.

In the heat of debate, an ebullient Corcoran leaned across our desk (thankfully, it's wide) and instructed Humphries in no uncertain terms to "keep his bad data to himself."

She was referring to Zillow's recent calculations indicating that 19 percent of U.S. homeowners are still underwater on their mortgages. (Ms. Corcoran founded a successful real estate brokerage firm catering to clients with very deep pockets.) She then countered with data from the National Association of Realtors, saying 33 percent of all residential closings this year have been cash-only deals. Drama aside, the two numbers speak volumes about the schizophrenic nature of the U.S. housing market.


Mr. Humphries came prepared with plenty of data. Most notably, he brought a map of the U.S. showing which states have the highest percentage of mortgages where the balance owed exceeds current appraised values.


The data is sobering for those of us living on the 22.7 square-mile strip of land called Manhattan. Ours is a rarefied world of $90 million condos and global inflows. The rest of the country is far less fortunate. So too perhaps are housing-related retailers such as The Home Depot, Inc. (HD) and Lowe's Companies, Inc. (LOW). Both have reported disappointing first quarter earnings in the past 24 hours. Their results provide more evidence of why JPMorgan Chase & Co. analyst Michael Rehaut is cautious following the bank's homebuilder conference last week. In his note yesterday, he cites builders' comments about a merely "okay" spring selling season, and tells investors he sees "only moderate upside."


Turning to the chart of the SPDR S&P Homebuilders exchange traded fund (XHB), we can appreciate the caution expressed by Humphries and Rehaut. It has risen 274 percent since the market low on March 9, 2009, compared to 178 percent for the S&P 500 Index. There are indeed pockets of exceptional strength in the housing market, but as Fed Chair Janet Yellen has testified, a broad housing recovery remains elusive.


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