NEW YORK ( TheStreet) -- Amid recent data on rising home prices, falling foreclosure rates and expected gains in overall mortgage refinancing and lending activity, watch for Wells Fargo's (WFC - Get Report) third-quarter earnings to propel the company's largest shareholder - Warren Buffett of Berkshire Hathaway (BRK.A) - to sing a housing recovery tune.
After a weaker than expected housing rebound in 2011 tempered Buffett's talk on the mortgage market, strong loan growth volumes at the investment conglomerate's largest bank holdings may stand as a an early barometer of a true rebound play after previous false starts.
Housing, a laggard through the U.S. recovery, gave Buffett reason to apologize for a 2011 forecast in Berkshire's annual letter that the market was in a full-blown recovery. "I was dead wrong," wrote Buffett, in this year's letter. Still, the 'Oracle of Omaha' maintained optimism on housing, stating in a July 12
CNBC interview, "
In what's expected to be another relatively weak quarter for large-cap bank underwriting, trading and advisory revenue, many analysts on Wall Street now point to a pickup in mortgage lending and refinancing as a key driver of industry wide earnings. Wells Fargo, the nation's largest mortgage lender is most levered to a pickup in housing market activity and its shares have gained nearly 30% year-to-date on strong overall loan growth.The question for Wells Fargo and the overall banking sector headed into the third quarter is whether a housing pickup is still to accelerate and whether it will be enough of offset negatives like falling interest rate-based earnings. On the heels of the Federal Reserve's September plan to begin a third easing effort - known as QE3 -- by buying $40 billion in mortgage bonds a month for the foreseeable future and keeping interest rates near zero through mid-2015, followers of the banking sector warned that the program could be a big hit to 2013 bank sector earnings "