Are the Stock Markets Telling Us Something?

by Howard BellThe report, released last week is another green shoot pushing upwards.

Home prices in the U.S., as measured by the S&P Case-Shiller home price indexes, rose in July over the previous month, as 18 of the 20 metropolitan areas comprising the benchmark saw saw a boost to real estate values (see chart here.)

For the 16th consecutive month, every region saw year-over-year declines, but the pace of those declines continues to decelerate, according to the Wall Street Journal.The ten-city index is down 33.5% from its mid-2006 high, while the 20-city index has declined 32.6%. UMM and DMM Confirming the stats market shares built to be reflective of moves in home prices acted as they should.

These market tools are investments in their own right, but they are also trend confirming tools. Two new investments based on the Case Shiller indexes allow people to invest in the direction of home prices. MacroShares Major Metro Housing Up Trust (UMM) and Major Metro Housing Down Trust (DMM).

Last week, UMM had gained more than 3%, while DMM was down by about the same amount. Since their inception in June 2009, UMM has jumped by nearly 35%, while DMM is down nearly 25%. (see chart here.) Reflecting investor expectations for the U.S. housing market( home prices will continue to rise over the next five years).

If you look at the price action of the UMM vs the DMM, you can see investors think that homes will continue to rise. Looking at the Dow REIT index, you see similar strong moves to the upside. Personally, I think the markets are ahead of themselves but they are a strong confirmation that people are beginning to look past the bust and are betting on the future.

Early?

Yes. We have the commercial recasts and the option ARMs to get through. The markets enthusiasm is emotional, we raised the flag because we avoided a great depression, but now there is more reality to face. The good news, The Economist made an observation I loved. American is brilliant at fixing itself.

Howard Bell PFP CCRM is the founder/editor of

Your Property Path.com, featuring over 450 articles on property management, Your Property Path SF, trade talk for the San Francisco real estate industry, Your Property Path News Brief, snap news updates and real estate market info, and Your Property Path Amazon Store. Howard is a property manager in San Francisco and holds a certification in financial planning.
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