Wingspan’s Horne to Moneynews: Housing Is Strong, But Won’t Boom

Tuesday, 12 Feb 2013 08:02 AM

By Dan Weil and Kathleen Walter

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The strength in the housing market is real and will continue, says Steve Horne, CEO of Wingspan Portfolio Advisors.

U.S. home prices rose 8.3 percent in December from a year earlier, according to CoreLogic.

“At the same time that investors have come to the opinion that prices are about at the bottom in most states, there’s also been appetite from immigrants to purchase homes,” Horne tells Newsmax TV in an exclusive interview.

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“That has provided a lot of price support. … You will continue to see some firming up [of home sales] and some price appreciation for a variety of reasons.”

First, houses in non-traditional foreclosure states are finally beginning to come out of the shadow inventory. In addition, investors are showing strong demand for properties they can deploy as rentals.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

“And there is a lack of other options as far as where you want to put your money,” Horne notes. In that sense, real estate is much like the stock market, which has soared “despite maybe the absence of essential fundamentals,” he adds.

“It’s just the lack of more attractive opportunities to invest your money.”

Existing home sales registered an annualized rate of 4.94 million in December, up 12.8 percent from the 4.38 million rate in December 2011.

Horne agrees with recent comments from Yale economist Robert Shiller that a housing boom isn’t in the offing anytime soon, because many people have shifted from home ownership to rentals.

But that begs the question of who’s going to own the rental properties, Horne says. “We are seeing a tremendous amount of investor demand from larger- and medium-sized funds that look to buy single family homes to turn them into rental properties.”

On the apartment side, real estate investment trusts (REITs) have performed very well over the past four years. AvalonBay Communities, one of the top names in the sector, has generated an annualized total return of 22 percent over the last three years, according to Morningstar.

Asked what the biggest risk is to a viable housing rebound, Horne cited general global economic uncertainty. “Some sort of exogenous macroeconomic event in Europe or Asia or other places could provide a shock sufficient to upset the still nascent U.S. recovery.”

Europe may be the place of greatest danger, Horne adds. “The U.S. has done a passably decent job of dealing directly with many of the fundamental issues that we’ve gone through over the last year,” he says.

“Sure, there’s more to do, but we have done quite a bit, and now we’re seeing the benefits of that. Europe is substantially behind the curve on that front.”

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

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