This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

What If Housing Takes a Double-Dip?

Stocks in this article: BACCJPMWFCXHB

Even if we set aside broad, macro concerns, there are still some reasons to be cautious about the housing recovery.

Housing demand in 2012 has been mostly from institutional investors who have seized the opportunity to buy distressed homes at deep discounts and convert them into rentals. While plenty of money is still sitting on the sidelines,that money can disappear if investors determine that the opportunity is no longer attractive.

Hedge Fund Och Ziff Capital (OZM) recently pulled out of the REO(bank-owned foreclosed homes) to rental business .

Institutional investors "may help drive home price appreciation in the short run, but are not likely to do so in the long run," Quinn Eddins, head of research at Radar Logic, a real estate analytics firm, wrote in a recent note."As prices for REO increase, the expected future appreciation must also increase in order for investors to achieve the same return on investment. If prices rise to a point where investors' expectations of future home price appreciation do not support their desired returns, then demand for REO will decline and prices could fall again."

Perhaps the rise in prices we are seeing now will lure enough traditional home buyers into the market to offset the decline in institutional interest. But in an interview with TheStreet, Eddins said he believes that scenario is unlikely.

First-time buyers still have difficulty getting credit. Even those with excellent credit scores might not be able to save enough for a downpayment amid an uncertain unemployment outlook.

Banks may be encouraged to loosen their credit standards amid rising prices, but that too remains uncertain without clarity on new mortgage rules. The Consumer Financial Protection Bureau is expected to release its rules on what constitutes a "qualified mortgage" in early 2013.

The rules will define what counts as a safe mortgage, one that a borrower has the ability to repay. Banks will have greater legal protection if they make qualified mortgages.

While clarity on the rules will help unlock some constrained lending, the agency needs to ensure that borrowers are protected but at the same time not define a safe mortgage so narrowly that it limits lending.

2 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,502.04 +102.37 0.62%
S&P 500 1,927.75 +23.74 1.25%
NASDAQ 4,385.3310 +69.2570 1.60%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs